Market reform and housing for the urban poor: an inadequate prescription
Post by Nikhilesh Sinha and Anant Maringanti
The urban wealth inequality figures brought to light by the recent NSSO survey titled Key Indicators of Debt and Investment in India, while not surprising, are a serious matter of concern achat viagra prix. The top 10% are reported to possess 50 times the amount of wealth of the bottom 40%. This inequality appears to be largely about land and housing, which account for 92% of wealth in urban areas. In fact the inequality may be much higher than the survey suggests as value of property is taken as per guideline prices and not market prices. Vidya Mahambare’s article titled “Wealth Inequality and housing reform”, which appeared in the Mint (9th of February 2015) makes these points quite persuasively.
However, the argument that reform of housing market will lead to greater access to housing for the urban poor – made in the same article – is less persuasive. The prescription can be summed up as follows: reform housing markets so as improve access to housing for the middle class and help the poor with education so that they can earn more and become property owners. While this argument would seem contentious even in developed world contexts, it is particularly problematic in the context of Indian cities, where a large section of the market operates outside or in the shadow of formal, legal, and urban planning frameworks.
Left to the market, housing prices are determined by relative desirability, depending on size, location and amenities on offer. The notion that a reduction in policy distortions might bring formal sector housing in central city locations within reach of the bottom 40% is, to put it mildly, misplaced. For example, Vidya Mahambare argues that the lower house prices in Kerala and Punjab (Rs 7-9 Lakh) vis a vis Maharashtra (Rs 35 Lakh) correlate with lower wealth inequalities and calls for radical reforms to remove market distortions. The said difference in urban land and housing might instead indicate that there is a higher demand for and greater limitations in the supply of housing assets in urban Maharashtra than either Kerala or Punjab, which if true would lead to a very different policy recipe.
Further analyses of the data and policy prescriptions need to be carried out with caution in light of our experience with policymaking in the past. Misreading of the political economy can lead to misreading of policy imperatives. It is crucial that that we take into account the realities of how a large majority of the urban poor and lower middle classes access housing services in cities.
One out of every four urban households are reported to live in hired dwellings with no written agreement or contract with their landlords (NSS 69th Round 2012). This constitutes over 80% of the rental market in urban Indian. Now, in line with arguments about the need for reform of property market, Rent Control is often characterised as the greatest impediment to more equitable housing access, and its removal touted as a panacea. However, as Kiran Wadhwa points out (Wadhwa 1991) in reference to the Delhi rental housing market, the effect of rental control or indeed its removal has little or no effect on a market where the majority of rental transactions are unregulated.
About 14 million urban households are reported to live in ‘notified’, ‘recognised’ or ‘identified’ slums (Census of India 2011), where land ownership is predominantly de facto, as opposed to de jure, constituting a gray area for policy. Housing in these areas is generally, though not always of lower quality, both in terms of material, as well as in terms of the access to basic services like water and sanitation. The existence of multiple claims on slum land means that while exchange is possible, this happens outside, or in the shadow of formal legal systems. It is these informal exchanges that predominate in the market for housing and land for the urban poor. In many cities in India, much of the land in slums is held and transferred through quasi-legal transfer mechanisms sometimes called ‘no-entry’. The word no-entry is a corruption of the word notary, or notary public, and the system of transfer involves a document typed on non-judicial stamp paper, signed by both parties and ratified by a notary public. This document is not submitted to the land registry authorities and no tax is paid, and yet it is recognised by all parties involved in the transaction that use, lease and exchange rights have been transferred from seller to buyer. Politicians and slum lords do play a large role in this economy but the medium is not black money understood in the conventional sense. The coin of exchange in this economy is votes, patronage linkages, and informalities of various kinds, which produce goods and services at an affordable price for cities.
Taken together, rental housing and unauthorised, quasi legal property transactions constitute a very large universe that exists outside the formal legal system. Until now, housing and land related reforms have not engaged directly with this universe, or in some cases paved the way for displacement and resettlement. The great inequalities in the pattern of housing and land ownership in urban India can only be addressed by acknowledging and working with the existence of the legitimate but not yet properly legal ownership, use and exchange systems, which dwarf the formal system. Market reforms could make home ownership possible for a slightly larger proportion of the middle class but it will do little to reduce wealth inequality between the top 10% and the bottom 40%.
This article was written as a response to an article which was published in the Mint Newspaper. It was sent to the editor but having received no response from the Mint, we felt at liberty to publish it on the HUL blog.
About the Authors:
Nikhilesh Sinha is a PhD Candidate at the Bartlett Development Planning Unit, University College London. He is a Fellow of Hyderabad Urban Lab (HUL).
Anant Maringanti is Executive Director of Hyderabad Urban Lab (HUL).
Mahambare, Vidya, Wealth Inequality and Housing Reform, Mint, 09/02/2015
Wadhwa, Kiran, Delhi Rent Control Act: Facts and Fallacies, Economic and Political Weekly, 25/05/1991
Government of India, Population Census 2011
Government of India, Ministry of Statistics & Programme Implementation, Drinking Water, Sanitation, Hygeine and Housing Conditions in India, July 2014
Cover photo by Indivar Jonnalagadda