India’s Tallest Building Cut Down To Size

The FT writes about the bust in India’s construction sector:

It was meant to be the tallest building in India, with luxury flats, a swimming pool and cinema where billionaires and Bollywood stars could enjoy a life of perfect splendour looking down over the Mumbai skyline.

But the Palais Royale complex now sits unfinished alongside other partially built structures tangled in the megacity’s traffic-choked downtown streets, an apt symbol of a crisis that threatens a key part of India’s financial system.

Part of the problem is cyclic, a shadow banking system that overextended credit and is now having to deleverage. India’s construction sector, however, is also plagued by systematic issues including the fact that major construction projects are invariably sued and thus become entangled with India’s notoriously slow legal system. Drawing on a Brookings India working paper by Gandhi, Tandel, Tabarrok and Ravi the FT notes:

But progress was soon slowed by legal challenges over allegedly unauthorised features, sparking a series of delays….However grand the planned building, Palais Royale’s woes fit a familiar pattern: 30 per cent of real estate projects and half of all built-up space in Mumbai is under litigation, according to a 2019 Brookings India report, with projects taking an average of eight and a half years to complete.

Comments

According to a Brazilian diplomatic expert, India was not ready in the 1940's for independence. I guess again Brazilians were right even if again no one cared.

It's hard to come by knowledgeable people about this subject,
but you sound like you know what you're talking about!
Thanks

Everything is very open with a clear clarification of the challenges.
It was really informative. Your site is very useful. Thanks for sharing!

India is a body shop

Clearly we need more Indians to immigrate here to bring us their not-at-all dysfunctional culture.

Exactly. Also, I never heard of the Modi Towers.

It's Chancery all over again.

If I had to put a positive spin to this slowdown.

Real estate was considered an ideal asset to park your grey/black money especially in a country which values hard assets . Now, real estate transactions have to be linked to income tax returns via the Aadhar biometric card/number. If the government has intent - and demonitisation showed that it did - it would be very easy to capture these properties into the tax net.

Real estate has now lost its lustre and it is finally some good news for the average middle class Mumbaikar/ Mumbai-ite (albeit with some structural pain).

No discussion of Indian skyscrapers would be complete without mentioning Antilia.

https://en.m.wikipedia.org/wiki/Antilia_(building)

The appetite of the wealthy in America for high end residential real estate and other speculative assets continues unabated. Is the appetite for investing in speculative assets rather than productive capital a market failure or policy failure? If the latter, what policies would encourage investment in productive capital? We've tried tax cuts for the wealthy but it hasn't worked; indeed, it just induced the wealthy to invest the windfall in high end real estate and other speculative assets. If economists have no good policy ideas, is that a market failure or a failure of economists?

Raising interest rates to historically normal levels would help there. If it isn't already too late to do that without a very hard landing.

30 per cent of real estate projects and half of all built-up space in Mumbai is under litigation, according to a 2019 Brookings India report, with projects taking an average of eight and a half years to complete.

So pretty much the same as San Francisco then.

+1.

But on the bright side San Francisco is turning Water front parking into a homeless shelter with an awesome view! Naturally the project is under litigation.

https://reason.com/2019/07/15/while-homeless-population-balloons-san-francisco-residents-use-environmental-lawsuit-to-stop-homeless-shelter/

Such is life in Trump's America.

San Francisco's not the precise opposite of Trump's America?

Is it, thought? Wasn't Trump a liberal? Doesn't he like to brag and stiff people? I wonder if there is an ounce of difference.

For example, Loretto Police Department has officially asked people to stop flushing drugs down the toiled because it is ruining the water supplies. I can not imagine Brazilians using drugs, much less in such staggering ammounts to create a health crisis.

Clogged courts impact GNP. In Greece we have a simple adverse possession case, where a neighbor is clearly trespassing on our land, since 2005 without a hearing. We could petition to have the case heard on an accelerated basis but in a normal developed country the litigation would have been heard by now.

I thought you lived with your teenage wife in the Phillipines.

I'm international Hazel. I actually own, jointly in some cases, property in three countries.

Own property in 3 countries...

..and live in the Phillipines?

"but in a normal developed country the litigation would have been heard by now"

Ie, not the US....

Hiking taxes to fund adequate civil courts costs too much, kills jobs by paying workers, and stops businesses from efficiently getting things done.

Clearly, all courts and laws need to be eliminated so private justice can be purchased to quickly solve problems.... the Godfather. Gangs. Protection.

In the land of mulp, Civil hearings in the US take 14+ years to come to court.

An example of the Austrian Business Cycle has been spotted in the wild.

It should probably be kept in mind this also applies to India coal power stations supposedly under construction or in planning.

Thought India was a nuclear power?!?

Thought nuclear power is so cheap no need to meter?!?

Only in the US is the regulation and legal system blocking power technology that is really really cheap?!?

On the matter of nuclear power India is the only nation currently seriously pursuing thorium reactors, which have many advantages over uranium ones. The US initiated the technology but abandoned it in the 1950s because one could not make nuclear weapons from such reactors, which is now among the various advantages of them, including grater safety and plentiful supplies of thorium around.

"notoriously slow legal system"

India's legal system probably has problems beyond this, but I wonder if one problem is, ironically, not enough lawyers (and judges).

I recall reading articles about Japan's legal system in the 1980s when it was thought that Japan was going to threaten the US as the #1 world economic power. Many commentators noted Japan's low number of lawyers per capita. The usual reaction was that this helped Japan's economy; fewer parasitic lawyers and lawsuits. But others who had more firsthand observations noted that the lack of lawyers meant that judicial action was very slow; the legal system was a bottleneck because there weren't very many/enough people involved in the process.

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