<div>People who feed on absurdity must have rolled about on the ground laughing hysterically at the spectacle of a loose political cannon shooting off allegations in all directions through October 2012 with no particular target in mind. Its Diwali time for sure and the rockets are aiming for heaven! Were these farcical incoherent ravings or the dawn of another historical inflection point?<br /><br />At a pinch I would say both. “Incoherent ravings” because the central conceit of the Vadra Gate story flies in the face of our whole cultural construct. In India, the son-in-law tail unfailingly wags the top dog daddy and you can never be damned for what your son-in-law does or does not do. Conversely, this is also an inflection point because thus far - be it politics in India or mafia gang wars in New York - “civilians” are not fair game for hit men. If you are not in the ‘family business’ and stay out of politicking or racketeering or whatever the family does, the competition does not make collateral damage out of family connections. Not anymore. Nevertheless, when the dust does settle on Vadra Gate as dust inevitably returns unto dust, the fruitiest piece would undoubtedly be the explicit acknowledgement of real estate as perhaps the biggest generator of political funding in the banana republic of the mango people.<br /><br />Historically, this has above all been true: since the dawn of agriculture and till the substantial advancement of the industrial age, land revenue has been the chief financier of the political classes. India today remains substantially an agrarian society. Just because the government doesn’t tax agriculture any more doesn’t mean that agricultural land is not still the primary generator of political revenue. The difference is only that this money has been channelled entirely into the parallel economy. How have we achieved this feat? This particular grease ball sofa on which our political classes recline in genteel generally ill-gotten luxury has four legs. <br /><br />First, within a decade of Independence, we went about enacting limits to the amount of land that a man could own because naturally, we wanted everyone to be a land owner in the emerging socialist paradise. The Delhi Land Holding (Ceiling) Act 1960 for instance limited land ownership to 30 standard acres. There was no corresponding minimum that a small family was allowed to hold and many owned a few acres in the first place. In this way, we kept the toiling masses on the land, slaving away using primitive methods because they hadn’t the education to understand new methods or, the money to buy the tools of the new methods if they did. In the fifty years since, expanding families divided; sub divided and re-subdivided: today, every small plot of landmay be owned by 20 or 30 people. <br /><br />Second, India went about creating laws telling farmers what they may do on their own land. Rural land was to remain rural and it could be only used for what the government thought was an “agricultural purpose”. This was a matter of national importance because we were a poor people who need every inch of land we can to grow enough food to feed our starving people. Naturally, commercial activities that generated a profit or materially expanded the economyor uplifted marginal farmers out of poverty were manifestly not agricultural purposes!The result has been that farmers are engaged in a vicious cycle of low productivity and unyielding self-perpetuating subsistence living. The cumulative effect of these two legs of the grease ball sofa has been the argument that land yields are low because land holdings are small but land holdings can’t be increased because it would decrease land yields! <br /><br />Third, where land can only be used for agricultural purposes, how do we ever set up an industry? As always, our license-quota-permit-maibaap government decided to arrogate to itself the power to drive the construction of the temples of modern India to the exclusion of substantially everyone else. <br /><br />For this purpose, it perpetuated a draconian British era land acquisition law that has done more to spread the joys of poverty and disease than most other laws. If you are not a regular reader of Fineprint already bored out of your mind with my intermittent return to this subject, you will find a summary of my thoughts in Land versus Industry, Pandora’s Real Estate Box and Land Acquisition Angst. I’m not going there again but the upshot of this third leg is that for a long time, the government alone acquired land for private people and it didn’t do it for nothing. If you wanted a piece of land, you “lobbied” the government and when enough mutual back scratching had been done, the land ended up in your hands. Of course, the compensation for the land almost never ended up in the hands of the farmer but I am not going there either. <br /><br />As we now learn, there is a limit to how much misery and violence you can inflict on the powerless without facing an unmanageable backlash. Control of something like a quarter of India has slipped to ‘Naxels’ and some of what remains is ruled by deliverers of diabolical diatribes like Didi whose main claim to political fame is to try and give the land back to the powerless. To this developmental challenge, the government has responded by gleefully manoeuvring to avoid acquiring land for private parties at all. Why?<br /><br />Ask yourself this: how will you privately buy a small plot of the land from each the 18 cousins who hate each other? How do you get them to act in concert? Do you even speak the same language? What is your leverage? You need influence, right? Believe you me, in the village, the man who has that influence is also the man who was made the sarpanch and has a voice in the community Khap. He is also the man who every politician pursues for his vote gathering abilities. There is a web of relationships out there and it can’t be done without political contacts at a high level. Net, net, you need political leverage to buy agricultural land and that leverage is at its highest when there is no law which allows a government to help you get your land for your upcoming industry or whatever.<br /><br />Thisbrings us directly to the last and fourth leg of our grease ball sofa. Since all you can do with agricultural land is engage in agricultural purposes, only agriculturists are ready to buy agricultural land and most haven’t the money to do so.Those who do have the money to do so have no intention of tailgating aromatically flatulent bullocks riding ploughs. This is why agricultural land costs nothing in India and urban land costs the moon.If you want to buy land to set up an industry, the law requires you take permission to change the use of the land. Here in Gurgaon, you go to the Director Town and Country Planning and get approval under the Haryana Development and Regulation of Urban Areas Act. What do you think this means? You know that you can buy land for a hundred rupees and if you get permission to change its use, it will be worth a few thousand. The man who is expected to give you this permission knows it too. Why should he give it to you and what interest has he in making you very rich very quickly? <br /><br />So who is going to get the land use converted for you? And how are you going to compensate him for it? You could give him a stake in your construction company, and since he is not putting in money to buy shares in your company, you would probably have to give him a loan too. Or you could give him a property for a song, and since the property is reward for services rendered, you need to give him a loan and then reverse the transaction later by some surreptitious means. The real estate business is awash with stuff like this. When people talk about real estate company shares being hammered because of poor corporate governance, I am speechless. Real estate and corporate governance? Whoa!<br /><br />So should you be surprised if you hear that 15 per cent of all of Gurgaon is owned through a cluster of front and benami companies by one political family? You may hear that another 20 per cent of Gurgaon is owned by other political facilitators and service providers. I have myself as a lawyer steered more than a few Gurgaon infrastructure projects featuring inevitably a significant but very quiet shareholder who had no visible business or domain expertise and no reason to be there. This guy never brings a lawyer, never demands shareholders rights and never displays any nervousness in the negotiation: he doesn’t need to because he doesn’t think paperwork is what twists necks best!<br /><br />So when people talks about the print media’s “conspiracy of silence” thus far about what has been going on since 1947, I shrug my shoulders and say: but this is what India has always been. You buy land in Kochi because you are amidst the clutch of politically connected people who control the decision to build a particular set of bridges for a new road or not. You then buy the land in various names, making sure the road is aligned along these parcels of land. Then you have the land use converted to residential or commercial and you sell it for billions to people who want to build townships and malls along that road. That’s AbracaVadra! Money for nothing, as it has always been in India: Why is Team K having seizures about it now?<br /><br />So as I sit here pondering the bullshit quotient of Vadra Gate, it comes down to the flowing Ganga and the man who the power to wash his hands in it but doesn’t. Everybody who could, did and those who didn’t, would, if they knew how to. This is the central truth about real estate in India. Bad mouthing someone because you don’t like his mother-in-law, or foster father in law, changes nothing. Deregulating land changes everything. But that topic isn’t even on the agenda, and if it was, are you sure it’s in your long term interest if you have political ambition? <br /><br /><br />(<em>The author is managing partner of the Gurgaon-based corporate law firm N South. He can be contacted at rcd@nsouthlaw.com. Many of the views expressed in this column are amplified in his new book “Bullshit Quotient: Decoding India’s corporate, social and legal Fine Print” </em>)<br /><br /><br /><br /> </div>
