The Hindu Business Line : Seeking remedies to Mumbai's travails

Abolition of rent control, urban land ceiling and stamp duty would not have stopped Mumbai's inundation. But it would have minimised the worst damage of floods and other natural disasters. To remedy the travail of daily commuting will need pro-active regulation that will make it profitable for employers to house their staff close to the workplace, says P. V. Indiresan, seeking lessons from Mumbai's monsoon travails.

Floods are natural disasters; they cannot be stopped, but their evil consequences can be — Paul Noronha

SEVERAL HUNDRED people died last week in the floods in Mumbai. Some critics have angrily called for the heads of hapless civic administrators. Many others want urgent reforms for better governance. If experience is any guide, after a couple of weeks, all this breast-beating will subside; the floods will be forgotten; Mumbai will be back to its old ways.

Nothing will change because Mumbai is like an old shoe. It may have holes in the sole, it may be in tatters, it may be ugly but its citizens have become accustomed to its shortcomings. Mumbai is as bad as it is, all our cities are as bad as they are, not so much because our politicians are corrupt, not so much because our administrators are inept, not so much because our businessmen are greedy, but because our citizens are reconciled to the way the things are.

Floods are natural disasters; they cannot be stopped, but their evil consequences can be. Contaminated water, poor sanitation and risky travel are man-made problems; they can, and should, be prevented. Those who live in high-quality houses suffer little from floods and other natural disasters including earthquakes. Those who did not have to commute long distances faced few risks.

If Mumbai had no slums, if people did not have to travel daily as far as they had to, floods would be merely an inconvenience, not the disaster they become each time. In other words, though floods cannot be prevented, quality housing plus minimal or no commuting will eliminate the resultant evils.

Unfortunately, not just in Mumbai, but in all our major cities, we have become insensitive to the presence of slums; we are not even worried when slums explode all round us. Poor governance is at fault because it deliberately promotes slums; citizenship is at fault because it is indifferent to the man-made daily (not occasional) disaster that slums are.

Rich cities of the West too used to be infested with slums graphically described as follows:

It was a fairly popular "development" made up of a hundred or so dwellings, each the size of a doghouse or a chicken coop, often constructed with much ingenuity with wooden boxes, metal cans, strips of cardboard or old tar paper. Here human beings lived on the margin of civilisation by foraging for garbage, junk and waste lumber. . . . They lived in fear of being forcefully removed by the authorities...

That is an accurate description of our own slums too. How did Western governments get rid of such slums and why are we unable to do so? Money (rather the absence of it) is not the problem.

Most slum-dwellers can afford the cost of a pucca house; what they cannot afford is the artificial price of land. Astronomical land prices are forcing even families with middle-class incomes into slums.

At its root, the problem is more psychological than economical. It was said of the American Depression of the 1930s: "Depression used to be a state of mind. Now it is a state of coma, now it is permanent. Last year we said, `Things can't go on like this,' and they didn't, they got worse."

The same is the feeling we have about slums and sub-standard housing. As matters stand, our cities won't go on like this; they will get worse — fancy flyovers and metros notwithstanding. Housing will get worse; water situation will get worse; traffic congestion will get worse; sanitation and cleanliness will get worse. They will get worse because we citizens have ceased to be logical, because we are in a state of coma.

Western governments got rid of slums (at any rate the worst of them) by realising some basic economic truths. We are aggravating the disease by refusing to accept the validity of elementary economic logic. Our economic thinking is primitive; it is of the type that believes the sun goes round the earth. It will not accept the non-obvious truth.

For instance, consider the following logic: The poor live in slums because they cannot afford high rents. Therefore, rent control is the solution for housing the poor. That is the obvious solution; that is the religiously accepted solution for Indian policy-makers and by the public too. The solution may be obvious but it is wrong.

Some 1.5 lakh dwellings are lying vacant in Mumbai and not rented out because their owners fear that, once they rent them out, they will never get their property back.

Suppose rent control is abolished, totally and irrevocably. Then, these empty flats will come into the rental market; a hundred thousand or more Mumbai households will move to better accommodations leaving behind an equal number of empty even if less attractive dwellings.

In turn, these empty apartments will be filled up by dwellers who are now living in even less attractive ones. The process will go on until, several lakh people who are now currently living on the pavements of Mumbai will move to better dwellings, even if they happened to be in a slum.

Thus, cumulatively, rent-control has affected virtually every strata of urban society including the poorest. Instead of helping the poor, millions have been deprived of better housing.

Thirty years ago I talked about this paradox of rent control to a genuinely honest and highly educated Cabinet Minister who had been a college professor himself. He saw the point immediately. Even then, though he came from Mumbai, he would not do anything because he was a socialist who had invested a life-time in political agitation against the evil ways of landlords.

He was an honest politician, he was intelligent but he had no courage. Mahatma Gandhi could shout from the rooftops, "I have committed a Himalayan Blunder", but he and none of his colleagues, had the courage to admit that rent control is an economic absurdity. That intellectual cowardice continues to this day.

In defence, some will argue when rent control is abolished, many families that are enjoying low rents (absurdly low ones) will suffer grievously.

Therefore, abolishing rent control will hurt those poor souls. That is true but those that will be affected are by no means poor souls. More often than not, the original tenants have sub-let their dwellings at market rents. The unearned profit they have made even without investing any of their savings is politically acceptable.

In contrast, landlords are considered criminal if they charge market rents — unless they build houses for the rich in whose case there is no rent control.

So, property developers build only fancy apartments and none at all for the poor. As a result, expensive flats (which suffer no rent control) are in surplus but for the poor (where rent control applies) there are few dwellings. Yet, we do not retract from this sad situation. We are intellectually paralysed; we are in a coma.

The Urban Land Ceiling Act is another economic absurdity. It has been on the statute books for decades in the belief that all capitalists are evil, and landlords particularly so.

These theorists forget that no landlord can live in the houses he rents out — that privilege belongs only to the tenant. The landlord does make money, but it is the tenant who is the beneficiary of rented dwellings.

Extortionate stamp duty is the third absurdity that arises from the false belief that buying a house is an extravagance. The fact that high stamp duties increase the cost of acquiring a house is not the real problem.

The real problem lies with the fact that evading stamp duty offers windfall profits. Those profits are an open invitation for criminals to take over the housing market, and they have. It is now virtually impossible to buy property without conniving with law-breakers.

Criminality is bad in itself; the fact that it dulls the conscience makes matters worse. Those in authority persist with illogical restrictions on housing not because they do not know it is absurd, not because they want to help the poor but because they want to enrich themselves.

In the late 1940s, food rationing had the same political aura that rent control and urban land ceiling now have. Food was so scarce that rice ration in Kerala was reduced to four ounces (100 grams) a day.

At that juncture, when millions were facing starvation, Rajaji liberalised food trade. Most people thought that prices will shoot up and that we will all be forced into starvation. Critics were wrong. As usual, Rajaji was right. The day control was removed, the Madras market was flooded with rice; prices actually came down.

Abolition of rent control, urban land ceiling and stamp duty will not stop floods because that is impossible. However, they will minimise, virtually eliminate the worst damage that floods and other natural disasters cause.

Even then the travail of daily commuting remains. That too should be remedied. For that we need pro-active regulation that will make it profitable for employers to house their employees close to the workplace.

(To be continued.)

(This is 155th in the Vision 2020 series. The previous article was published on July 25.)

(The author is a former Director of IIT Madras. Response may be sent to: indresan@vsnl.com)

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