The news has it that 7,50,000 forms were sold for participation in a lottery for the ownership of 5000 DDA flats in New Delhi.
Along with the form, each applicant has to deposit Rs. 1,50,000. Banks are happily loaning this money to applicants.
Does this make any sense?
What exactly is the resource that is in such severe shortage that 7,50,000 people scramble for 5,000 flats?
It certainly cannot be land – for around the DDA’s Vasnat Kunj there is enough open land to construct lakhs of farmhouses!
So how do we understand this phenomenon?
Very simple: DDA flats sell in the market at a premium over their cost. So an allotment via the lottery is a windfall gain. Everyone and his uncle queue up for application forms hoping for this windfall gain. Banks step in too – for they cannot lose.
The DDA is a creature of socialism, with its monopoly on land development and housing. In those days it was felt that competing private real estate companies would not cater to the aam aadmi and that a monopoly run by The State was preferable.
Yet, monopolies run by The State are much worse than competitive private firms in a free market.
The DDA monopolizes the supply of land, of housing, and of roads – in Delhi. As a monopolist, the DDA gains by undersupplying all three. The undersupply pushes up prices – and the DDA rakes in monopoly gains for its personnel. The public are cheated. The aam aadmi is left homeless.
The premium paid for a DDA flat is nothing but a “black market price.” This premium is paid because the good in question is extremely scarce. This extreme scarcity is because of State Monopoly.
Note that this premium is not paid because DDA flats are “better” or more aesthetically pleasing, or more functional. DDA flats are terrible. DDA localities are the pits. No one would actually choose to live in them – if there were a choice.
Conclusion: There must be a competitive market for developed urban land, housing and commercial space: a competitive, private sector-driven real estate market. The DDA must be closed down.
DDA is a fraud on public. There is no other word for it. DDA could have sold all flats at market rates and used the money to build more flats. If DDA makes such an announcement the property prices would fall drastically.
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