Source: Ideas and Institutions | Issue #42
Analysis
Understanding Hyderabad’s Land Rush
Developing countries see a high demand for land as the economy transitions from rural to urban, and one consequence of that is an increase in land and real estate prices. India is bearing witness to this phenomenon too. This broad-brush narrative can sometimes obfuscate the specific behavior of actors within land markets, the incentives of buyers and sellers, and the role of the accompanying regulatory framework. Looking at specific geographies can help disaggregate this phenomenon of rising prices better.
Among major Indian cities, Hyderabad is seeing one of the steeper increases in housing prices. The Residex index maintained by the National Housing Bank shows this. In the figure below, Hyderabad’s housing price index in the Residex is tending much higher than that of cities like Mumbai, Bengaluru, and Delhi during the period between 2018 and 2023.
My attention was also drawn to the city’s real estate rush by the eye-popping numbers being bid for land parcels. According to news reports, one of the plots being auctioned by the government was sold at Rs. 100.75 crore an acre, a record for the city. This was 40 percent higher than the previous record bid for a single plot, Rs. 60 crore an acre, which was set last year. The bid amounts have been so high that the Telangana government has reportedly earned over Rs. 6,000 crore in revenue through land auctions this year alone, an amount that is significantly higher than its expectations.
While these prices are nowhere close to high-value land transactions in other major cities in India, they are remarkable at first because of their distance from the city center. For example, the land parcel that fetched the bid price of Rs. 100 crore an acre was part of an auction of land parcels in Kokapet, an area adjacent to the western part of the Outer Ring Road of Hyderabad. Similarly, many of the land parcels being auctioned by the government are away from the city center and also some distance away from the office spaces occupied by major information technology (IT) companies in HITEC City, Gachibowli, and so on.
This demand for real estate is not limited to land parcels being auctioned by the government. Hyderabad is seeing a secular increase in demand for housing-related investment as well. For example, a news report argues that there has been a rise in demand for larger houses in Hyderabad. Residex data seems to corroborate this—the prices of larger houses seem to have increased more than the demand for smaller houses in the city. The slope of the green line in the figure below highlights this.
What is driving demand for land in Hyderabad? Prices are a reflection of the underlying dynamics of demand and supply. I spoke to private sector professionals in the real estate market to try and understand these dynamics. While each gave me a slightly different perspective on the developments based on their vantage points, these conversations were helpful in understanding the aggregate data in terms of its constituent dynamics. I therefore deal first with factors leading to demand, followed by the role of supply-side factors.
Factors Leading to Demand
Before delving into this section, one obvious fact has to be stated: land markets in India are no longer local, but global. They are shaped by migrants and capital flows emanating from other parts of the country as well as the world. The local demand for land and real estate is therefore shaped by global economic forces.
1. Local demand for housing and commercial real estate: Over the past three decades, Hyderabad has emerged as a dynamic economic center with a thriving IT and pharmaceutical industry. It is also the capital of Telangana and was the capital of the erstwhile undivided Andhra Pradesh. The city’s economic boom was both fueled by the development of good-quality infrastructure and is, in turn, generating a demand for more and better infrastructure. As per one of my interviewees, real estate in existing IT parks like HITEC City is saturated. Demand for land is therefore increasing partly due to the increasing needs of locally situated industries.
Rising incomes in the city are also leading to increasing demand for real estate as an investment opportunity. While this is a common phenomenon across many Indian cities, Hyderabad’s real estate has been relatively more affordable than other major cities like Mumbai, Bengaluru, and Delhi. Real estate is therefore an asset class into which incomes within the city are being invested. Investment in real estate is attractive for retail investors because, relative to other investments, it also provides investors the opportunity to avoid paying capital gains taxes under the Income Tax Act, 1961.
This demand for real estate investments is reflected partly in the increasing sale of undivided shares of land within the city. An undivided share of land (UDS) is the fractional ownership over the land parcel a homeowner receives when he or she buys an apartment in a real estate development project. The General Secretary of the Hyderabad chapter of the Confederation of Real Estate Developers’ Associations of India (CREDAI) estimates that “about Rs. 20,000-30,000 crore has been invested in the UDS sales,” and the Telangana Real Estate Regulatory Authority (RERA) has cautioned against transactions in UDS, stating that the UDS is being sold even prior to the registration of the real estate project with RERA. One of my interviewees stated that though the general practice is to have UDS registered along with the apartment, it has become increasingly prevalent to transact purely in the UDS and then divert the money into other projects. The implication is that while the land is purportedly being bought by developers for real estate projects, in fact, the land itself is the asset and not the eventual project.
2. Investments by nonresident Indians (NRIs): Telugu speakers account for the fastest-growing part of the Indian diaspora in the United States. Naturally, this diaspora, both in the United States and other countries, is seeking to invest savings in India. According to some reports, Hyderabad is either the most or among the most preferred Indian cities for investments by NRIs. Most NRIs prefer to invest in “luxury and ultra-luxury properties,” and this may be the reason why one report finds that Hyderabad has experienced the highest rise in the luxury homes segment among major cities in the past five years. Another news report states that this is driving demand for gated communities and “senior living” real estate projects for parents and grandparents.
3. Interest from developers in other states: Real estate developers from other states have also been interested in Hyderabad due to relatively more affordable land prices. For example, real estate developers from Bengaluru have, over the past few years, invested in Hyderabad due to these factors. While real estate is fixed, capital is mobile. Considering the now-botched development of the city of Amravati in neighboring Andhra Pradesh, real estate investors also reportedly shifted their focus to Hyderabad.
Supply-Side Factors
While demand is driven by both local and global factors, supply-side responses are predominantly local. If one were to look at the consistent increase in land and housing prices, one may expect supply to be lagging behind demand. It is therefore strange, as the foregoing analysis shows, to see that there has been a significant response from the supply side to keep up with increasing demand. In fact, supply-side responses may be the cause of price appreciation.
The Telangana government has done plenty over the past decade to bring more land and real estate into the market. One important mechanism has been to develop transport infrastructure to expand the city. This has largely followed the program outlined in the city’s Vision 2020 document, which “suggested making Hyderabad as one of the engines of growth through the creation of high-tech knowledge enclaves.” As the road network has grown, developments have started coming up along this infrastructure. For now, it is focused predominantly on the western part of the city leading up to the Outer Ring Road. The recently auctioned land parcels in Kokapet and other areas are in this region. However, the government is now taking steps to develop infrastructure to promote industrial development in other parts of the city. In 2020, for example, it issued orders to increase the dispersion of its electricity grid to provide better electricity services to newly converted IT parks (erstwhile industrial parks).
The government is also continuing the sale of open plots through auctions in the western part of the city. The recent land auction that generated the high bid of Rs. 100 crore per acre was located in Kokapet, abutting the Outer Ring Road on the western side. In addition, in a controversial move, the Telangana government repealed its long-standing order G.O. 111 in 2022, which “demarcated a 10-sqkm radius of two century-old reservoirs Himayath Sagar and Osman Sagar outside Hyderabad city” and prevented development in this area. While it is currently being litigated in the Telangana High Court, this repeal brings another 1,32,000 acres of land around these two lakes into the city’s land market. For comparison, Hyderabad’s total area is currently approximately 1.6 lakh acres.
Lastly, the government has also allowed greater intensity of land use, which enables more development per acre compared to many other Indian cities. For example, it has allowed unlimited floor space index (FSI) in the land parcels auctioned in Kokapet and Budvel. While Hyderabad scrapped uniform FSI restrictions in 2006 in other parts of the city as well, it still limits FSI for buildings based on factors such as road width. According to one of my interviewees, in unlimited FSI land parcels, this has led to a significant increase in how much real estate can be built up per acre. Normally, while developers estimate an ability to develop around 1.5 lakh square feet per acre, with unlimited FSI, they are now estimating an ability to develop about 7 lakh square feet per acre of land. According to one news report, Hyderabad in general records a much higher average FSI (6–7) than the national average (2–2.5).
It therefore seems paradoxical: supply-side responses are not leading to a decrease in prices even though the responses seem significant. How does one make sense of this?
Concluding Thoughts
One of the interviewees told me that the real estate market is run by investors, not consumers. Prices go up when investors see value, and in this sense, investors are also consumers. From this perspective, the state’s supply-side responses seem designed to drive up value rather than to regulate prices. Its attempt seems designed to ensure that Hyderabad’s real estate market remains attractive for investors. This is one role of all governments. States should attempt to make their respective geographies attractive for investment. Increasing prices are an indicator of success—higher real estate prices reflect increased demand. Prices that at first seem remarkable—Rs. 100 crore an acre—make more sense when seen from this perspective. When one considers that the government has developed infrastructure around a set of land parcels, liberalized land use restrictions, and allowed unlimited FSI, all to cater to a burgeoning demand for office space and commercial use, the value of these land parcels is higher than one may instinctively assume.
Investors in local real estate markets in Hyderabad, and indeed other major Indian cities, are no longer local. Land prices are not set by local factors alone. Instead, they are an amalgamation of local and global demand for real estate, either for use or for investing in a safe asset class. While supply-side responses are local, they are designed to attract investment from as wide a catchment as possible.
This has obvious implications for local planners. First, how does one do long-term planning other than thinking of infrastructure development? As local land markets become global, predicting population growth, infrastructure requirements, and so on, is going to be much harder. A twenty-year economic vision begins to sound like a much better plan for a city than a twenty-year master plan.
Second, who looks after consumer protection issues if some of the mechanisms for investment, like the UDS, are used to defeat the purpose of land allocations? If such transactions become rampant, they will soon begin to resemble Ponzi schemes. It is therefore necessary to have consumer protection laws like RERA enforced effectively, even as this investment-led real estate boom takes place.
To conclude, understanding the constitutive forces of demand and supply in Hyderabad’s land markets helps understand the nature of the market itself and provides important hints as to why prices are behaving the way they are. This analysis also leads to a clearer distillation of the policy problems in need of solutions.
—By Anirudh Burman
Review
Michèle Lamont on the Politics of Recognition
On October 17, the Indian Supreme Court issued a judgment in a case where the petitioners had asked the court to recognize same-sex marriage. While recognizing the importance of the petitioners’ cause and underlining the government’s responsibility in ensuring that those in such relationships do not face discrimination by the state, the court declined to grant legal recognition to such marriages. The majority opinion also disallowed civil unions and the adoption of children. They argued that these are matters for the Parliament to decide.
Until recently, the stigma against such relationships was encoded into the law, as homosexuality was criminalized under Section 377 of the Indian Penal Code. The provision was struck down in 2009, reinstated in 2013, and finally struck down again in 2018. Once the stigma was removed from the books of the law, the journey toward the legal recognition of such relationships began. Those involved in this effort seem to have believed that the court would again side with the petitioners’ cause.
In India, those seeking rights that are not yet recognized by the law have often preferred approaching the higher judiciary for their cause. This is not surprising because doing so is perhaps the shortest route available for most such causes. However, implicit in this approach is the assumption that the matter lies within the domain of the judiciary. It is not easy to tell where the boundaries are. From reading new rights into the constitution, such as the right to privacy, to declaring transgender people as the “third gender,” the courts have indeed obliged in several such cases. Not this time, though. The petitioners and their supporters obviously disagree, but this is where the matter stands.
A Broader Politics of Recognition
A recent book, albeit situated in an entirely different context, can put this and other such issues in perspective. In Seeing Others: How Recognition Works—and How It Can Heal a Divided World Harvard University’s Michèle Lamont considers how efforts to improve recognition for hitherto marginalized groups are working in Western societies, especially the United States. Written from a sociological perspective, the book is mainly based on Lamont’s work on the politics of recognition and interviews with many activists, thinkers, creative people, students, and other young people. The main challenge the book is focused on is bridging “recognition gaps”—the gap between the sense of dignity and worth held by an individual or a group and the recognition that society grants. This gap can have a significant impact on one’s overall well-being.
Lamont lists three avenues for building recognition: through political activism and the law, through culture and media, and through our own interpersonal experiences and networks. Lamont observes that significant progress has been accomplished in improving recognition for some marginalized groups in the United States, “not only through political and legal means, but also through changes in the culture and in ordinary people’s lives.” Such efforts “were about challenging stereotypes, being heard and seen, and expanding constricting roles.” The way she sees it, the “top-down and bottom-up strategies complement one another.”
Lamont suggests that changes in broader cultural narratives are essential for producing lasting legal and political change. For instance, the 2015 U.S. Supreme Court decision, which accorded national recognition to same-sex marriage, came after decades of state-level lawmaking had recognized such marriages in more than 70 percent of the states and shifts in the public perception of such relationships had been achieved. In 1973, 90 percent of Americans disapproved of homosexual relations, but by 2019, that number had fallen to 21 percent. Often, courts ride the wave of changing public opinion. Once they issue the judgement, it becomes the landmark that defines the change, making invisible the underlying shifts that made it possible.
This is a difficult message for those pursuing recognition, especially when said recognition is central to their ability to flourish as human beings. From their perspective, they should have a “right” to recognition that does not depend on what others in society may think. However, when faced with a situation where a longer legislative route is the only one available, it is worth paying attention to this message. At some point, we all—some more often and more intensely than others—are reminded that politics is more difficult than we would like. A broad-based politics of recognition is also important because people are usually not just seeking legal recognition but also understanding from others in society. As Hegel wrote in The Phenomenology of Spirit, our self-consciousness depends on the self-consciousness of others, such that our awareness of ourselves is shaped by the recognition of those around us.
The Strategies for Recognition
Most of Lamont’s book is about strategies for bringing about the changes that are upstream of political and legal reforms. She focuses on three key elements of the process to change the cultural discourse about who gets recognized and who doesn’t.
First, she suggests that “new narratives” are needed to “support positive representations of all groups.” Such narratives are important because exclusion flows from other narratives that deny recognition to some groups. One of the examples she gives is how stigma around HIV-positive people was reduced by first changing the narrative from one linking the condition to certain lifestyles to one treating it as a medical condition that could afflict anyone.
Second, she gives many examples of “change agents” and organizations that shape and promote these narratives in a society. These include artists, activists, experts, academics, and others who contribute to changing the narrative in their own ways. In this regard, people in media, entertainment, and politics have an important role to play because they can amplify such narratives like few others.
Finally, “recognition chains,” which are networks of change agents and organizations that scale up and disseminate messages of recognition, help amplify and mainstream the new narrative. Without the emergence of such networks, new narratives would not get mainstreamed. Overall, the social process that Lamont describes involves creating and spreading new narratives through recognition chains of change agents so that the narratives become accepted by many people in the society.
Lamont also writes about how each person looking to expand the sphere of recognition to include more groups can contribute by making more inclusive choices in their own lives—from the people they befriend, to the narratives they tell their children, to the approach they take to desegregating their own neighborhoods. Citing the work of Lily Geismer, she gives an example of her own neighborhood—the Boston metropolitan area—where “upper-middle-class neighborhoods have remained racially homogeneous for decades despite the professed progressivism of those who live there.” In other words, talk is cheap, but making progress toward a more inclusive society will take more than just saying the right things and making small donations to causes. It will require making substantively different choices in the way we live. For new narratives to be accepted, it is important that many of those who already enjoy recognition accept them.
An important premise for Lamont’s work has been that thinking about dignity requires a broader approach than one that focuses only on economic well-being. This approach should consider a variety of ways in which people can be recognized as valued members of society. Throughout the book, she uses the “American dream,” with its emphasis on individualism and material success, as a dominant myth that needs to be countered. While not entirely opposed to the values underpinning this myth, Lamont suggests that these values lead to the marginalization of those who do not succeed in ways privileged by this myth and also put the blame for this on their own conduct while downplaying the role of social factors. So, Lamont’s suggested approach to the politics of recognition is meant to reduce the emphasis given to individualism and material success while also complicating the explanations for success. She recommends expanding the criteria for recognition to include solidarity, empathy, a sense of belonging, and other considerations. Lamont argues that choosing between economic inequality and recognition is not an either-or question—both economic well-being and social recognition are important for a life of dignity.
Lamont critiques purely individualistic, legalistic, and deterministic approaches to the politics of recognition. First, she critiques those who focus only on personal grit to overcome the challenges of recognition. She argues that such an approach underestimates the role played by social factors, such as the material conditions and the narratives of recognition. Second, as discussed earlier, she suggests that relying mainly on top-down approaches for bringing recognition through the law may not work and may even create backlash that would undo the gains. Third, she rejects the deterministic view on tribalism put forth by some people that humans have “a permanent and innate tendency to hoard resources in favor of our ingroup members.” She argues that polarization is not just driven by cognitive factors but also by external ones, such as levels of unemployment, economic competition, economic inequality, and electoral rules. So, whether a group considers itself in opposition to another group and the sense of "groupness" it experiences are driven by social factors that can vary or may be changed. Lamont suggests relying on narratives that build on “ordinary universalism,” which focuses on commonality rather than differences, to de-emphasize distinctions between groups.
The Perils and Paranoias of Contemporary Politics of Recognition
While full of interesting insights and inspirations, the book is not without flaws. Lamont’s earnest commitment to the cause of expanding the sphere of recognition comes through, but many of the perils and paranoias of the contemporary politics of recognition can be seen in the book.
For one, Lamont seems to accept every quest for recognition as equally worthy. By presenting activism for the recognition of racial equality in the same way as discussing the quest to recognize the subculture of sadomasochism, Lamont seems to avoid the difficulty of distinguishing between different kinds of efforts for recognition. For instance, there is arguably a difference between groups being denied recognition based on, say, race or gender and those being judged based on lifestyle choices. Perhaps those involved in these efforts would not agree, but this agreement is not the only consideration while studying a large number of efforts for recognition.
The book also gives a one-sided treatment of many issues that in fact deserve a multifaceted engagement. These include, among others, the process of economic change, the meaning of cultural artifacts such as movies and television shows, and the nature of contemporary activism for recognition.
In writing about rising inequality in the United States, Lamont seems to paint a rosy picture about the pre-Reagan era and a bleak one about the impact of the Reagan era. While policy shifts during the Reagan era, which had their own history in the excesses of the preceding era, may have played a role in the rising inequalities, it is also important to consider the technological changes and financialization of the economy that contributed to this phenomenon. Further, for a discussion on recognition, it is more important to consider the nuances of how economic mobility has changed. For instance, for the United States, Raj Chetty’s work shows that economic mobility varies a lot depending on the neighborhood, with some areas enjoying very high mobility and others being as bad on the measure as many developing countries. It also shows that high-opportunity places share certain qualities—good schools, greater levels of social cohesion, many two-parent families, low levels of income inequality, and minimal residential segregation by either class or race.
While Lamont gives many fine examples of how movies and television shows helped change the narrative and improve recognition for certain groups, her interpretation of some of the cultural artifacts seems simplistic. For instance, she cites The Simpsons and its depiction of Homer Simpson as a “bumbling idiot” as an example of how TV shows marginalize the working-class experience. This is a very simplistic understanding of how the character has been represented and misses something essential about the show. In many ways, the show also represents the solidarity, community, and sense of belonging that Lamont advocates for. Selective reading of cultural artifacts with an ideological lens is common among those engaged in the politics of recognition. By doing this, they often deny the polyvocal form and polysemous nature of many of these artifacts. This is one of the reasons why the politics of recognition is often at the risk of becoming a boring and hectoring kind of politics instead of rooting itself in the joys of fraternity and equality.
Lamont also seems highly reverent toward all the activists she quotes and cites, as well as the tactics they deploy in their respective pursuits. She defines the term “woke” as describing someone who is “attentive to subtle forms of discrimination and injustice” and blames conservatives for unmooring it from its original meaning by dubbing it as “cancel culture” that is intolerant, elitist, and a threat to free speech rights. While there is some truth to her assertion that those opposed to such activism might be exaggerating its problems, it is also important to critically analyze the tactics that are deployed by the activists. There is a tendency among some of the activists to draw quick and simple “friend versus enemy” distinctions and then go after the proclaimed “enemy.” It would have been useful to see a more nuanced sociological analysis of this type of activism, which has become quite prominent in the United States in recent years, but the book mostly presents brief hagiographic accounts of the activists associated with it.
C.S. Lewis once wrote, “We must picture Hell as a state where everyone is perpetually concerned about his own dignity and advancement, where everyone has a grievance, and where everyone lives the deadly serious passions of envy, self-importance, and resentment.” One wonders if the pursuit of recognition could send our societies down spirals of endless resentment, as each successful effort to achieve recognition gives rise to new demands and resentments. However, such pursuits of social progress are like climbing a mountain. We are making progress until we reach the top, but if we keep going, we risk sliding down. So, while the politics of recognition could go too far, that is no reason to avoid pursuing it.
We human beings are usually limited in our perception. We see what we want to see and hear what we want to hear, unless we are persuaded or made to do otherwise. Our commitments are mostly to those close to us, especially those we like. Still, the world has become much more just in many ways. It is worth considering how this came about. In its insights and its limitations, Lamont’s book can be instructive to those wishing to actively engage in the politics of recognition.
—By Suyash Rai