Why are land prices so high in India?

If you are associated with one of India's leading housing finance institutions for more than three decades now and have been its Chairman for virtually half that tenure, you surely know a thing or two about the state of the Indian real estate market. Hence when I came across an interview of Mr. Deepak Parekh, Chairman of HDFC, in a leading business daily, I read it with much interest.





In this interview, Mr. Parekh has reiterated his view of having a regulator for the real estate industry, something akin to regulators for the petroleum and civil aviation industries. And the reason why Mr. Parekh believes real estate must have a regulator is to control greed that got companies and investors in this sector into big trouble in 2008.



Mr. Parekh has also blamed faulty land policy and politicians for having created artificial land scarcity in the country, which has led to unjustifiably high land prices . As he says, “A lot of politics is also involved. The lengthy approval process is another key reason why land prices remain so high. Multiplicity of approvals creates scarcity of supply, keeping prices elevated. Quick approvals will increase supply manifold, leading to lower prices. Land transactions have been made complicated to ensure that supply remains constrained and prices remain high.”