An essential feature of housing in the metro cities is that, except during certain periods, we are actually dealing with a large stock: for example the 20 million dwellings in Mumbai increase by only 200,000 each year. Even if the construction industry could raise its normal output by a third (which would be a considerable achievement), the rate of increase in the standing stock would only rise from 1 to 1.5 percent per annum in spite of the Real Estate Boom in India .
This ‘stock’ nature of housing has important implications with regard to housing policy:
1. In the short period (which may be many years) the only immediate solution to a housing problem is to restrict demand to the limits imposed by the fixed stock.
2. In the short period, and in fully developed urban areas, the price of old houses determines the price of new houses. Thus the land price is a residual, and high land prices do not restrict the supply of housing
3. If the number of dwellings available does not cover the immediate ‘needs’, resources must be diverted into house constructionThe process by which the housing stock is increased through the price mechanism will now be examined more thoroughly by the enforcement agencies due to the phenomenal appreciation in land values in cities like Mumbai. Many of the prominent realtors are already under the scanner in other metro cities.
However, the real estate developments in Mumbai, the financial capital of the country far exceeds that of scores of other cities and towns in India put together. The money required to buy just a cent of land in the up market areas of Mumbai is enough to buy acres of land in other parts of the country.
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