Gurugram’s realty surge runs parallel to decline in Delhi
Two months ago, a flat in Gurugram was sold for over Rs 100 crore. It’s true that this was a massive apartment, covering more than 11,000 sq ft. But it is still a mind-boggling price tag. In fact, in the past couple of years, prices in Gurugram’s tonier blocks have shot up, while those in the high-end markets of Delhi have stagnated.
On an average, real estate prices in the 10 most expensive localities in Delhi have gone up by just 3 per cent in the past one year, and 21 per cent in the past three years. Compare that to Gurugram’s top 10 condominiums, where the average price has risen by 29 per cent in one year, and 76 per cent in three years. Today, the per square foot rate of a luxury apartment in Gurugram is about 33 per cent more than a comparable builder flat in a posh part of South Delhi.
I believe that this shift of money from Delhi to Gurugram mirrors a fundamental change in how power functions in India. To understand this, we need a short flashback into why real estate prices exploded in Delhi from the late 1980s. It can be explained in one word — corruption. And it coincided with economic liberalisation that began under Rajiv Gandhi, and accelerated with the Rao-Manmohan reforms.
The fundamental reason for this was that liberalisation allowed private capital to take control over the most prized of all treasures — public assets. As we know from the case of coal mines, often these assets would be given on a first-come-first-served basis, while others would be handed over through non-transparent tenders. At the same time, the private sector got easy access to bank credit, giving corporate India a greater share of total loans issued by commercial banks.
But it wasn’t easy to get access to ministers and babus sitting in the hallowed corridors of power in Lutyens’ Delhi. An entire ecosystem of fixers developed in India’s capital to broker deals between business houses and the government. Till India’s economy was driven by a licence-quota-permit raj, there were a handful of business houses which controlled most of the manufacturing sector. They dealt directly through politicians. Opening up the economy made it an open house for anyone who had a connection inside government offices. You would find them in perpetual meetings hanging around in five-star hotel coffee shops and lounges.
It is an open secret — if it is a secret at all — that most deals brokered between business houses and those who ran the government involved greasing palms. A lot of it was unaccounted for, and came in cash. Some of this money also went to the deal brokers and fixers. Much of this was in black. It is a no-brainer that the easiest places to park cash are in gold and real estate. So, throughout the 1990s and well into the mid-2000s, big-ticket real estate transactions in Delhi had a huge cash or ‘black’ component. Money was flowing into real estate without any connection with what the average household could afford. One sign of this was that rental yields from these properties were a fraction of the EMIs that one would have to pay to buy them.
Real estate became both a store of wealth and also a multiplier of wealth. Real estate brokers and builders became immensely rich overnight. Some of them upgraded to register themselves as companies and even listed them on the stock markets. At times, this would result in unintended comic situations, such as when I was interviewing a real estate magnate and an industrialist during a pre-Budget show in 2007. The industrialist looked at the real estate company owner and said that he looked very familiar. The realty honcho looked sheepish, as he revealed that he had been the broker for the industrialist’s first home.
Anyone who has covered politics in the UPA period will bear testimony to the exponential growth of power brokers in Delhi. Most of them had some sort of a cover business, but their main income came from brokering deals between netas and corporates. These people proliferated in the expensive residential areas of Delhi, pushing up prices dramatically in the 2000s.
The Modi government seems to have dismantled this ecosystem completely. Power has shifted away from South Delhi to Mumbai and Ahmedabad. At the same time, a different part of the economy has grown exponentially. This is the startup ecosystem, many of which were launched from small offices and apartments of Gurugram. Some of these startups have become unicorns and their founders have received untold wealth from funding agencies and by selling some of their stakes in IPOs. These are the people who are pushing up prices in Gurugram at a time when prices are falling in Delhi.
This will have a significant effect on the composition of the elite and the public culture it fosters. The old power-broker system was heavily dependent on the Delhi-centric functioning of the Congress, and even the old BJP. Those who matter in the Modi government do not have roots in Delhi. Delhi’s culture was closely tied to what political scientist Sudipta Kaviraj called
the bureaucratic-managerial-intellectual elite. In popular language, this elite has come to be known as the Lutyens’ elite, with their liberal-secular culture. Power brokers had to perforce pay obeisance to that culture, and even absorb and embody it.
The new power elite has no such ties. It is driven by mercantile values and cultural practices. This, as I have argued elsewhere, forms the basis of the new authoritarian ultranationalism that we see in public discourse. It is the foundation of the ‘New India’ we hear of today, which is muscular, majoritarian and deeply aspirational.
The author is a senior economic analyst
