Well, this one is borrowed from my favorite again ‘Mr Krugman’!! (Blush Blush 😉 )
Okay, coming back! So looks like this blog is turning into a ‘Whats happening in Mumbai blog!’ B-)
Anyways, till I shift to some other city (which looks difficult as one year back I decided to dig my head into a deep well called ‘the doctoral affair’ 😀 ) here is more from Mumbai 😀
There is something wrong with the old city. Is is the gravity? Or is it the sea? Or the fat aunties? Why do these buildings keep collapsing? Some sane minds would suggest ‘Age’.. point taken (maybe). So as Mr Krugman enlightened his readers (me!), I assume it is my karmic duty to enlighten my readers 😀
One of the reasons why these buildings keep collapsing is not fat aunties dancing on the roof tops (they dance at all the places and all the times, as me!) but 1947 (grand music follows)…..
With independence came partition and that was the time when big cities like Mumbai had a huge influx of refugees. To temporarily address the issue of housing for these refugees, rent controls (fixing a maximum rent chargeable by landlords) were established in select areas by the government. Due to political reasons, surprisingly the 1947 rent controls have continued to stay in place. So prices of rent that were fixed in 1947 continued to hold. In 2000s after much aggression by landlords, these rates were revised but the problem persists. Why? As rents are fixed by law they are not allowed to change based on demand and supply forces. Hence, as time passes, the gap between the fixed rent and the market rent increases and this has the following negative effects-
1. Firstly, people who can be potential landlords backout as they think it is unprofitable and uncertain. Hence lesser supply.
2. Secondly, landlords who have already rented their buildings on rent find the rents so low that they do not/ cannot maintain / repair the buildings as and when required. Imagine a landlord in year 2000, getting a rent of Rs 2 per sq feet as fixed in 1947 for his/her house. Too low a rent- landlords refuse to repair, residents refuse to vacate. Result: Gravity…
Casual Empiricism 