Adarsh, which in Sanskrit means "ideal", was the name conniving bureaucrats and politicians chose for a residential block they built on very expensive land grabbed illegally from the defence department in south Mumbai.

While the officers, politicians and army officers involved are in the dock and may pay for this with a spell in jail, its impact has been far reaching and affected millions of people in Mumbai, including readers of this newspaper.

Here's how - since this hit the headlines government officials have been wary of approving any real estate projects for fear that a whistleblower may in future find out a discrepancy leading to court proceedings and punishment.

No Dip in Prices

Real estate consultancy Knight Frank in a report this week said only 55,000 apartments were available for purchase in Mumbai in the financial year ended March 31, 2012, compared with 92,000 flats in the previous year.

This resulted in apartment prices holding up to their current levels despite lack of demand. The report said only 45,000 flats were sold in the year started April 1, 2011 as against the annual average of 80,000. This was mainly due to high prices and interest rates.

Typically, in a supply-demand scenario of this kind, apartment prices would have fallen by 25%. Assuming an average ticket size of Rs 1.5 crore, a decline by a fourth on 80,000 flats would amount to an astounding sum of Rs 30,000 crore.

That's the kind of financial loss the Adarsh, or ideal, conspirators have caused to home buyers in Mumbai just so they could each get a property worth Rs 30-40 crore. If our legal system punished this kind of crime with a pay for the loss caused principal rather than a free stay at a government facility, how much would each of those convicted have to pay back to the city of Mumbai?

Venality Inc

Even if Adarsh hadn't happened, the state's corrupt government officers and political masters would have to enslave themselves and their future six generations to repay the kind of financial loss they cause to buyers of homes and offices in Mumbai.

Typically, 15-20% of the sale price of flats has to be paid by developers in Mumbai to town planning, municipal, government officials and gangsters. So, if you have just bought a flat worth Rs 1 crore, its actual price should have been Rs 80 lakh. The 20% additional charge has been passed on to you.

Any peon in a town planning office would have assets worth Rs 5 crore, mid-range officials between Rs 50 crore and Rs 100 crore and top guns at Rs 500 crore - Rs 1,000 crore. If a developer does not pay, he's out of business and this doesn't just apply to the jute trader-turned-builder.

This pay off goes even from large groups that have a more sophisticated way of handling this. All prestigious real estate projects in Mumbai will have two sets of architects - one will be firms such as IM Pei & Associates - the other will be a local called a "permit architect".

Date-9/7/2012
Source-The Economic Times