THE THUMBTACK AND THE ELEPHANT 

I had a conversation with a developer recently - not the well-established mega-project sort, but a struggling small-time player. He was looking to develop a 12,000 sq.ft apartment complex on a 6000 sq.ft. property tucked away in a bylane, despite the permissible limit being half that. When I asked, "How will you get formal approval?” he replied, "The plan sanction will only show 6000 sq.ft. but they will look the other way.”

“But what about ethics? Clearly you are in violation of the law. Doesn't this bother you?”

He said, “Of course it bothers me. But what do you want me to do? I look around, and everybody is violating - every property developer, every homeowner. You know, I was thinking exactly like you when a friend of mine showed me this gigantic layout with thousands of apartments being built, every one of them illegal. Why should I be the only one following rules?”

I persisted, "Surely, everybody needs a bank loan, and if you do not have formal sanction, banks wouldn’t lend?"

He laughed and said, "The banks are the ones pushing their clients to take home loans. They don't ask for formal sanctions, they don't look for approved plan documents. It's a feeding frenzy out there." 

Ultimately, all talk of urban planning and land use policies need to be interpreted and acted upon by citizens, developers, financial institutions and thousands of small players like this struggling individual. Each is a price-taker in this complex process, without the time, the capacity, or the inclination to change the rules of the game. And so what we see on the ground is this cacophonic free-for-all, which we call urban development in India.

And this violation virus, this thundering elephant is trampling across urban India, unchecked. Unfortunately, while we all stand to lose in the long run, everyone “wins” in the short-term. The real estate developer wins, squeezing every square foot. The homeowner wins, getting a roof, possibly at a discounted price. The politician wins, as he controls the unlocking and dispensation of scarce land resources. A small handful of conscientious individuals and institutions shout themselves hoarse about due process and environmental degradation, but get drowned out in this "Come and get it before the sale ends” bazaar.

Most solutions seem too trivial and insignificant, almost like trying to use a thumbtack to bring down the trampling elephant. And yet, we cannot stand by and watch this chaos unfold – we just need more powerful thumbtacks.  

Let me therefore offer a two-track approach, and then suggest a possible powerful thumbtack that could catalyse this approach. First, we need clean up our bylaws. Our bylaws today reflect an antediluvian attitude towards urbanisation. Rather than learn from hundreds of other experiences in other countries, we apply impractical and dangerously outdated laws, which are bound to be violated. We need bylaws that are intelligent, up-to-date, relevant. This process of creating new bylaws needs to be done carefully, in a manner that is consultative and participatory - not only because it will be a better document but because all stakeholders can feel a sense of ownership, and a desire to comply.

The second aspect deals with enforcement. We have to move away from a traditional enforcement attitude of a government that "oversees" in a command-and-control manner, but rather have decentralised and self-regulating mechanisms that encourage compliance, with checks and balances. This could include items like ensuring that builders lose their certification if a construction is in violation of approved sanctions; allowing local enforcement of bylaws, as is the case with many other cities in the world - nobody cares more about building violations than the neighbours. And if they can be bought off, they deserve the neighbourhood they get - at least, there will have nobody to blame except themselves.

However, such ideas are not new, and there are plenty more. What we are missing is a catalyst that can act as a trigger, to move us into this kind of a more intelligent legislative and regulatory regime. 

Given what has happened to the real estate finance market, we probably have the trigger that we have been looking for. The housing loan business has grown from 3.4% of GDP in 2001 to 6.1% by 2004, with over Rs 50,000 crores of disbursals. The irony is that while these trends are important for the country’s development, the consequences are unsavoury negative externalities. The unbridled financing of urban development – including urban housing – is causing the jungle that our cities are becoming, and feeding intense self-interest. The foodchain goes all the way down to the 23-year-old sales agent of a commercial bank, who cares nothing about bylaws, just his commission on the deal.

The question is whether we could use this economic energy to catalyse some positive outcome. One way could be to demand that housing finance cannot be done without complete building plan sanctions and have penal clauses that come down hard on banks, which lend without compliance. Imagine what would happen to the unabated supply of funds for urban housing if banks are liable for financing illegal constructions. Think of the sudden interest that senior bankers would take in bylaws, and the pressure that would be applied on municipalities and state governments to create better bylaws – the challenge would be to ensure that that the results are not skewed in favour of big business.  

If we can hold the banks accountable, this can create relentless pressure to establish the two-prong approach suggested earlier: revisiting the bylaws to make them more current and organic, and establishing an enforcement mechanism that is transparent and realistic. Think of what is at stake - a Rs 100,000-crore housing finance business growing at 30% a year. May just be the powerful thumbtack that could topple the trampling tusker.

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The writer is Founder, Janaagraha. He can be reached at ramesh@janaagraha.org