Politician-builder nexus: EC data offers more proof that they are in cahoots

If any further evidence is required that politicians are in bed with realtors, data from candidate declarations to the Election Commission provides it.

Some time ago, Firstbiz wrote about the sharp fall in real estate project launches in the run-up to elections based on PropEquity data. The obvious conclusion was politicians needed the money for elections, and the realty sector - among others, of course - had to cough up the moolah.

We wrote last month: “New projects have been put on hold…Gurgaon has seen the largest 70 percent drop in project launches in the last one year. From 4,967 units, the launches are now down to just 1,474 units. Even in Noida, which is largely seen as an investor-driven market, launches are down by half. Ironically, mutual dependence between builders and politicians politicians is most acute in areas where land is in high demand, such as fast-growing regions near New Delhi.”

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The Economic Times today (8 May) allows us to speculate on how this nexus may be working. Just as the 2G scam involved getting realtors into telecom, courtesy A Raja, the Election Commission data parsed by the newspaper suggests that making short-term loans may be one of the ways money is moving between realtors and politicians. The really big money may, of course, be off the books. This is just the tip of the iceberg.

While loans and advances to politicians have come from many sources whose authenticity cannot be determined, what stands out is loans from realtors. And the beneficiaries cut across party lines. ET lists Mumbai-based beleaguered realtor HDIL, Bangalore-based Sobha Developers, Raheja Developers of Mumbai, and the Sahara (UP) and Salarpuria Groups (Karnataka), among various lenders to politicians. HDIL, which has already reported one loan default (the lender has since withdrawn the default notice) seems to have concluded that loans to politicians are not such a bad thing: Nitin Gadkari of the BJP seems to have borrowed a crore from this firm. (Read the full ET story here).

The other politicians to benefit from such “loans” are Ambika Soni of the Congress, Kuldip Bishnoi of the Haryana Janhit Congress (HJC). Harsimrat Kaur of the Akali Dal, Gopinath Munde of the BJP, Hema Malini, again of the BJP, Rabri Devi of Lalu Prasad’s RJD, and K Chandrashekara Rao of the Telangana Rashtra Samiti (TRS).

While the disproportionate share of realty loans to BJP veterans seem understandable since the widespread expectation is that the next government will be led by BJP’s Narendra Modi, TRS is interesting for a simple reason: after the bifurcation of the state, a lot of property held in Hyderabad by Seemandhra MPs may get sold in semi-distress sales, which means having KCR on your side - assuming he becomes the first CM of Telangana - is not a bad idea for realtors.

The real estate business in many parts of the country is in deep trouble precisely due to this politician-builder nexus, where prices are held by politicians sitting on land releases for development till builders make their profits. This means willing property buyers are now down to a trickle, and actual purchases (except in far-flung suburban areas) are restricted to speculators and big money. (For an earlier story on politicians involved in real estate, read these Firstbiz stories here and here. These stories make it clear that even realty investors in companies listed on the stock market have been left in sackcloth and ashes).

The nexus between politicians and builders is now very, very clear. To get the real estate sector going, this nexus has to be broken. Real buyers will not emerge in viable numbers till this happens.