Rent-seeking: How landowners exercise their 'residual' rights

Rent-seekers are a class apart. They can and do find avenues of earning their incomes from things that don’t belong to them, like the goon who takes protection money from the petty hawkers and builds his own coffers; like the slumlord who takes his slice just for allowing you to build a shack on someone else’s parcel of land.

This new one is also a class apart – new in the sense of being unknown to have been a practice elsewhere except in Thane, a city which has been living in the shadow of its big brother, Mumbai. In Thane, people who sell away land to builders-developers continue to exercise what they think are their residual rights on it and seek rents.

Children play outside a building in Mumbai. Reuters.

This is mostly to be found in the new areas west of the Eastern Express Highway, primarily along the several kilometre-long Ghodbunder Road. This has been in vogue for about a decade and is said to be even strengthening.

Here is how it works.

A landowner in what was hitherto a village now in the ambit of the city sells his parcel of land to a builder who puts up a tower or two or even a whole township. Or, he works out a partnership with the developer and the profits are taken once the flats are sold. The rights of the original owner of the land end there, ideally they should.

However, he does not stop there.

When the new occupants come in and need the usual services, the laundryman, the milkman, the electrician, the plumber and the daily car washers have to secure the original owners’ permission before they gain access to the apartments. All interlopers are told to stay away and in some colonies, the system is respected by the tradesmen.

This permission does not come cheap.

The guy, who washes the cars daily, comes with a couple of others, riding three-on-a-bike, only after he has paid, say Rs 50,000 per building as his permission fee. So does the newspaperwallah and every other person. If anyone else encroaches into that turf, they do not fight; the landowner is informed who then ‘takes care of it’.

If the milkman is irregular, the newspapers are delivered late, the dhobi does not press the shirts well, then the residents cannot find another person because the monopoly rights have been paid for. Most residents do not know this system and often lament the absence of an alternative; they are just stuck with the problem.

This started about a decade ago when huge swathes were handed over to developers who built the properties in stages and allowed the original landowners to harvest jawa plums (jambhool) and mango from the trees as yet not felled for development. If trees had to be felled to make way for the structure, the builder allowed that to be taken away as wood. These picking were small change for the developer but the landowner was taking away his traditional harvest.

From that stemmed this concept of residual rights which they started to sell, forcing the service providers to overcharge – overcharging being a measure of the difference between the housing societies where this practice is not enforced and where they are - for services. An electrician charges, say, in Hiranandani Estate Rs 50 for a visit. In neighbouring Rutu Estate, it is a mere Rs 20-30.

A possible explanation for this, by way of their justification, could be that having sold the land or signing away the development rights either for a share on the market rates of apartments then in vogue, a land owner feels his yield has been lower than that of the landowner who came in later.
Naturally, the guy who sells later tends to get more what with the geometric rise in the land costs. This led to this practice of charging fee to secure rights which does not necessarily bridge the gaps but does give comfort by having secured some gains.

However, it is not yet clear if the practice of hiking the rates for this would be revised from time to time but the game is on. This has added to the muscle of the landowners who continue to stay in the neighbourhood of the new colonies and thus have political, police links, being the gaonwallah. Also, it makes him a patron of sorts to the seekers of avenues to do their business.

This clout has helped some to even prevent local shops from buying, say milk, from other distributors for a gaonwallah is also one. He would sell to the retailers only at MRP, which makes milk costlier by a rupee per half litre. Many stores therefore prefer not to stock them because they have a good reason.

“Gaonwallon ke saath kuch lafda nahi mangta hai” is the refrain. One who defied this had his shop window shattered a couple of years ago. That explains it all.

Updated Date: Jan 14, 2013 16:30 PM

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