Despite the festival season—cutting across communities, various freebies being offered and substantial discounts, buyers are staying away from property purchases. However, a few analysts feel that it would be better to cash in on the current discounts, as rates are likely to go up in the near future
Amid dismal sales figures, city developers and builders were looking forward to Gudi Padwa for some improvement. Unfortunately, despite the freebies and other attractive offers, buyers have shied away from purchasing properties.
"Last year, it was comparatively better," said a Borivali-based broker. "This year, it brings us no joy. We have not seen a single registration this year, and I know of other brokers in other parts of Mumbai who are suffering in the same way," he said.
'Gudi Padwa', 'Akshay Tritiya' and 'Dussera' are traditionally considered to be auspicious occasions for making purchases, and usually see a lot of activity in the realty sector. Many people register for buying properties, and builders and brokers too, offer attractive deals to woo them. Gudi Padwa, which comes around the time of Punjab's 'Baisakhi', the Tamil 'Puthandu', Andhra's 'Ugadi' and Kerala's 'Vishu', is a profitable time for developers.
Many developers have offered discounts up to 20% on property prices and other offers to attract buyers. Even those developers, who had been otherwise reluctant to restructure property prices, have offered some sort of incentive. For example, the Sanghvi Group declared the launch of 'Sanghvi Paradise' at Rs1,854/ per square foot (psf) for the first 50 bookings along with offering discounts of up to Rs3 lakh for Sanghvi Exotica and up to Rs100/psf for 'Sanghvi Valley', 'Sanghvi Ecocity'. 'Sanghvi Nakshatra' and 'Sanghvi Nisarg' and 'Shankheswar Nagar'.
However, the magic has not worked. Neither has this year seen many project launches. Ramesh Nair, managing director-west India, Jones Lang LaSalle, said in a report, "The number of launches is lower when compared to last year, as not many projects have been approved in the last four months. There is a noticeable trend towards smaller-sized units, obviously meant to catch the tail-end of demand."
It appears as if the festive spirit cannot outbalance decreasing affordability. As Mr Kalpesh Shah, treasurer, National Association of Realtors (India), pointed out, projects which offer affordable rates are the only ones likely to sell. In many cases, people have stayed away from developers who have not reduced their prices.
"But what do we do?", remarked a developer in Navi Mumbai. "The last year has been bad, and some people are under pressure to settle bank dues with the financial year ending. So, we couldn't offer much discounts."
However, some experts feel that it is better to register for property now. "Post festival, some developers may hike prices citing increased input costs", an analyst said. Mr Nair said that people who are willing to take advantage of the festive offers and pay 30%-40% down payment will make a profit.
The real problem with bribery is paradoxically a problem with law. So, the best and most economically efficient method of eliminating corruption would be simply to eliminate the laws themselves
Kaushik Basu is a professor of economics at Cornell University. Cornell is located in the quaint, neat and beautiful town of Ithaca, which is about 320 km, or a four-hour drive north of New York City, in the US. He has recently returned to India, the country of his birth, to advise the government.
Like all emerging markets, India has a problem-too much corruption, too many bribes. Professor Basu has a solution. He has suggested that paying bribes should be legal.
His ideas come from one of my favorite disciplines, game theory. The logic goes like this. Right now, both the government official, who receives the bribe (in good legal speak the bribee), and the person making the bribe (the bribor?) are punished if the crime is discovered. Since both are equally guilty under the law, the bribor has no incentive to expose the activity.
Professor Basu's idea is that for so-called "facilitation payments", small payments made to expedite routine business needs, like clearing customs or obtaining permits, the bribor's actions should be legal. In theory, once the bribe has been made, the bribor can expose the bribee to prosecution. This threat would act as a legal disincentive to deter the bribee or government official from soliciting the bribe in the first place. Right now, the interests converge. Since both bribor and the bribee face punishment, it is in both their interests to keep quiet.
But will it work? To answer that you have to ask why do people pay bribes anyway? Bribes by definition involve government activities. There has to be a government official. The bribor wants the government official to act, refrain from acting or act in a manner that favors the person making the bribe.
In the case where bribes are paid for purely ministerial functions, making bribe-paying legal might help, if we assume that the government official once exposed would actually be subject to punishment. No doubt this would occur in Ithaca, New York, but would it occur in India or another emerging market? Probably not.
Recently, according to the Indian newspaper, The Hindu, via WikiLeaks, an American diplomat was shown two chests full of cash that the ruling Congress Party was going to use to bribe opposition Members of Parliament at $2.2 million apiece. Although, no doubt well aware of the bribes, the squeaky clean Congress party leader, prime minister Manmohan Singh, denied the allegation.
Again, by definition, the government official taking the bribe is part of a government. The government, or the party in power, most likely appointed the official for political reasons. As the former American president, Ronald Reagan, said "the 11th commandment was that thou shall not criticize a member of your own party."
So the government, in order to protect itself, will not have an incentive to prosecute the official receiving the bribe. Instead it will be more likely to persecute the person who exposed the malfeasance, the whistle-blower. Which points to the problem neglected by professor Basu, other economists and financial analysts, who assume that their theories will work anywhere regardless of the legal framework.
The real problem with bribes for ministerial functions is that the government has monopoly. For example in many countries for many years the state controlled telephone service. Getting a landline often took many years and many bribes. With the advent of mobile phones, multiple companies offered service and the monopoly disappeared along with the potential for corruption.
The other aspect of bribing government officials has to do with having the government official use his discretionary power in a manner that benefits the person paying the bribe. In this case, if paying the bribe was legal, it would make the situation worse.
The person making the bribe is doing so to obtain a competitive advantage, like a cheap mobile licence. If he exposes the official, then he loses the advantage. So his best move in game theory would not be to expose government official, but rather use the evidence of the bribe to extort further advantages.
One of the main problems with bribery is transparency. Businessmen are not sure who to bribe, how much to bribe and how to ensure that the bribed official actually performs the contracted action, so the market is always inefficient. Decriminalizing the paying of bribes will simply help the bribors enforce the contract through extortion.
The real problem with bribery is paradoxically a problem with law. Many laws have a tendency to distort the economic environment and markets. So, the best and most economically efficient method of eliminating corruption is usually simply to eliminate the laws themselves. Reducing the size of government, reducing its monopoly, outsourcing its services, limiting discretion, reducing regulatory interference, diversifying enforcement and above all, increasing transparency, are far better methods to eliminate corruption than decriminalising an obvious theft.
(The writer is president of Emerging Market Strategies and can be contacted at [email protected] or [email protected])
The revenue loss by the three state-owned oil marketing companies- Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation-will be the highest-ever, even more than what they lost in 2008-09 when crude oil touched an all-time high of $147 per barrel
New Delhi: State-owned oil firms will lose a whopping Rs174,000 crore on selling fuel at government-controlled rates this fiscal, 68% more than what they lost when crude oil touched an all-time high in 2008-09, reports PTI.
Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation will "at current international crude oil prices lose Rs174,126 crore in revenues on selling diesel, domestic LPG and kerosene below their imported cost in the 2011-12 fiscal," a government official said today.
The revenue loss, termed as under-recovery by oil firms, will be the highest-ever, even more than what they lost in 2008-09 when crude oil touched an all-time high of $147 per barrel.
The three oil firms currently lose a record Rs16.76 per litre on diesel, Rs28.33 a litre on kerosene and Rs315.86 per 14.2-kg domestic LPG cylinder.
In addition, they lose about Rs4.50 per litre on petrol, whose rates have not moved in tandem with the imported cost despite its pricing being freed from government control in June last year.
"Losses on petrol are not included in the under-recovery figures for 2011-12 as it is a decontrolled commodity," the official said.
The basket of crude oil India buys had averaged $83.57 per barrel in 2008-09 and calculations for the next fiscal have been done at the prevailing rates of around $110 a barrel.
"The average price of Indian basket of crude oil in the last fiscal was $85.09 per barrel, higher than the 2008-09 average when the government had cut customs and excise duty on crude oil and products to check the impact of rising international rates on domestic markets," the official said.
Finance minister Pranab Mukherjee has refused to cut customs and excise duty on crude and product this time to protect his projected fiscal deficit.
"The situation in current 2011-12 fiscal will be worse...
The three PSU oil marketing companies are losing Rs492 crore per day on diesel, domestic LPG and kerosene sales," he said.
In 2008-09, the government had issues oil bonds worth Rs71,292 crore to the three firms to make up for more than two-thirds of the revenue loss. Upstream oil firms like ONGC provided another Rs32,000 crore.
In the 2010-11 fiscal, the three firms lost Rs78,061 crore, but so far the government has provided only Rs20,911 crore in compensation.