Indian economic development hits a crucial stage

A sell out to the private sector?There can be few countries in the world which seemingly offer the same kind of long term growth potential as that of India.  However, the change from state led economic growth to a market economy is proving to be a little troublesome in some areas.  The main change is occurring in the world of commercial property (and the transfer of property assets from the state to the private sector) and the employment sector.

There are a number of issues to consider which include :-

History of state property portfolio

There are great areas of India where many years ago the state came in and claimed land for a whole host of new ventures, businesses and other uses.  Some of this land had originally been owned by private third parties and while they were reimbursed for the property at the time there was no actual open market so prices were very much dictated by the state.

Government projects

Much of the property which we are now seeing sold to the new wave of developers and businesses in India had originally been put aside for government projects which were created to ensure that the local population had employment opportunities.  There were literally millions of people working on farming ventures that had no right to or no control of the land on which they worked but they were backed by the authorities.

Employment prospects

As we touched on above, the Indian authorities took over much of the land across the country for state run ventures but now many of these ventures have closed down, are run down or set to be replaced by private operations where there are no guarantees of employment for the local community.  This is set to cause serious unrest in the country with locals seeing new firms and business people enter the area and make serious money – leaving very little for the local community.

Property ownership

As much of the land across India was taken under state owned control for the good of the local community and to ensure they were able to make a living off the land and in state owned operations, where does this leave the subject of ownership if the land is sold on?

There is an argument that the land was acquired solely for use by the government for the good of the local community and if this ‘promise’ is broken then the original land owners may have a claim on the land.  If this is true, and it has not been proven as yet, then there may be property ownership issues in India for many years to come.

The Indian economy

Even in the midst of the ongoing worldwide economic slowdown the Indian economy continues to perform well above the worldwide average.  We have seen serious upward movements in the economy as well as the property market and the new found wealth of the country is starting to show through both in India and overseas.  Many now expect the Indian economy to be something of a powerhouse on the worldwide stage in the future as the potential for the area is still mainly untapped.

However, while some of the best known companies around the world battle for a slice of the wealth being created in India there is an even stronger polarisation of the rich and the poor.  As we touched on above, many government led projects and government properties are being sold off to the private sector to attract more and more companies to the country.  But this is taking away vital employment prospects in some of the poorer areas of India and pushing more and more people into serious poverty.

On the surface it looks as though the prospects for India have never been better and to some extent this may be true but the spread of wealth is not equal and the country is still a nation of extremes.  So what can be done to ensure that all areas of the Indian population benefit from this new found interest in Indian property and commerce?

The future

There are many issues which need to be addressed if the Indian economy is to expand at a pace and in a way which is both safe and beneficial to all involved.  The fact that the authorities seem very much to be selling out to the private sector in many areas does not bode well for the future as there is a risk that this sector will soon attain a power which restricts what the state can and is able to do in the future.

Many people are now calling for a property compensation scheme, based upon current market values, to ensure that as and when an area is claimed by the state and eventually sold on to a private company there is financial compensation for the local community.

In the days of heavy state run businesses there was the opportunity for life time employment, there was no real emphasis on increasing profitability but the new private firms entering the market cannot afford such luxuries.  If they are not as lean and price competitive as possible then a competitors is sure to grab their business – in affect the days of heavily subsidised state employment are falling by the wayside.

What does this mean for the property market?

The massive increase in the overall wealth of India has seen a mass of new and exciting property hot spots appear across the country.  However, as we covered above, this wealth has not be distributed on an even basis and many areas of the country have been pushed further and further into poverty – these are often described as the unseen price of capitalism in the country.

Property prices in the more affluent areas of India are on the rise and while this is slowly seeping out into surrounding areas there will need to be some serious intervention by the state to bring many of the rural areas into play.  While there are many areas of India to consider for property investment (mainly centred on the business communities) some areas of the country are literally worlds apart on a relative wealth basis.


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