New Delhi, December 10—The housing meltdown in the U.S. got me thinking about the property market in India. With the dramatic urbanization and growth of Indian cities property prices have skyrocketed. In good neighborhoods in Delhi prices have increased 100x in 30 years. I met a small dairy farmer who supplied a neighborhood with milk from a few cows by bicycle who had sold his property for $2 million (see picture below).
Property and property rights, or the lack thereof, is a central theme in free market India. India has national, state and municipal laws supporting intellectual and physical property but enforcement of those laws is weak. This is especially the case in housing. In India possession is more than 9/10 of the law—it is the law. In a situation similar to rent controlled properties in some U.S. cities (remember rent control in Cambridge?), there are millions of tenants who occupy properties, pay nominal rent and cannot be evicted.
Land is an emotional issue in India. Hundreds of millions of farmers still make a living off their land. The size of the average farm has decreased since independence as generation after generation has subdivided land among their children. In the cities single family homes have grown into multi-story apartment buildings with each floor given to a child as inheritance. Even the mighty Tata Motors was forced to move their Nano car plant from one state to another because small farmers protested against having their land taken by eminent domain. While India is a mobile society, people tend to retain their ancestral land. This creates a shortage of properties for sale, especially in old established neighborhoods in cities.
Most Indian families I know have a property dispute within the family, generally resulting from inheritance. The legal system is slow and corrupt and it can take upwards for 10 years to resolve disputes (it is very easy to delay the legal process by bribing clerks and even judges). As a result possession has become the instrument of choice in such disputes. When the second parent passes away the children start moving themselves or their relatives into parts of the property to stake a claim. Naturally this creates discord within families. Feudal India is never far from the surface of 21st century India.
In contrast, intellectual property is well protected in India. Partly as a result of joining the WTO and the fact that most ordinary people are not affected by IP, it is not politicized and the courts generally act quickly to resolve disputes. A colleague who returned from California to take care of an ailing mother with Alzheimer’s is running a product development outsourcing company. A couple of his employees naively showed software source code they were working on to a competitor in the process of a job interview. Subsequently a major U.K. competitor of their U.S. customer came out with an identical product. My colleague was able to sue in the Indian courts and put his employees in jail.
[Editor’s note: This is Part 3 of a travelogue by Xconomist Vinit Nijhawan, who is in India visiting venture capitalists and startups with an eye to bridging the Boston and Indian startup ecosystems. We published Part 1 on December 5 and Part 2 on December 8.]
