Greater Noida Crisis : The Economics Behind

Greater Noida Crisis : The Economics Behind

Greater Noida crisis are making waves in almost all quarters of the society. I mean the  government, judiciary, politicians, real estate power brokers, banks & financial institutions, investors (common man) and of course the Farmers.

One fine day the court decides that the compensation given to farmers is not justified and the state government has taken their lands on some false pretexts.

Lets look at how the money changed it hands during the whole transaction –

Land Flow chart

FARMERS ————————> GOVT ———————–> BUILDERS ———————–> INVESTORS

Farmers gave land to the government against money, govt sold this land to real estate builders against money (& say bribes) and then the real estate  companies sold their projects i.e land divided into apartments to the Investors. These Investors borrowed money from the Banks to finance their deals.

Banks lend both to Investors & Builders, as they were authorized by the Govt.

Money Flow Chart

FARMERS <———————– GOVT <———————- BUILDERS  <———————— INVESTORS

(builders  & investors : borrowed money from banks)

Investors Money = Personal Savings + Investors Bank Loans

Builders Money = Investors Money + Builders Bank Loans

Govt Money = Partial of Builders Money

Farmers  Money = Partial of Govt Money

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In-depth balance sheets –

Builders Books should account for the Investors Money, Builders borrowed money from bank for the project, Land Cost, Bribes to Government Officials, Actual Project Cost (to be few majors).

Builders Profit = Investors Money + Bank Borrowed Money – Land Cost – Project Cost – Commissions

(Commissions here include bribes paid to Govt Officials for allocating land & commissions handed to agents for selling their properties)

 

 Case Analysis :  Judiciary says return the Framers Land

Government will return the Land Cost to the Builders. Now the main concerns are –

1. will Govt also return the commission / bribes they received – NO

2. money given as commissions to agents will also not come back.

3. money already invested in starting the building work, will not come back. (which includes Investors Money  and Bank Borrowed Money)

4. now the money left is not enough to be returned back to investors and the bank. (builders profit is directly proportional to investors money, now he is in a fix. if he sold flats at high rates, he needs to return the same money back or if he sold the flats in nominal rates, he still needs to return back).

5. builders are in a bigger problem here. however the kind of people they are, its extremely difficult to extract out the Investors money. they are in such a grave problem, that they cannot do anything but to delay the payments, or give back a small token of money.

6. investors who are the common people will be crushed. they have already taken loans, they EMI’s have started (some cases) and they see no future.

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What is going to happen ahead –

1. farmers can’t use these lands for agriculture again. that’s why they sold in the first case.

2. farmers said the Govt took land at a very cheap rate, they have never denied the fact – they are open for re-negotiation.

3. after the political situation settles down a little, they are going to re-negotiate.

4. Govt will again sell the same land at revised rates to the Builders, they will again receive their commissions.

5. Builders will further pass on their new cost to apartment owners on pro rata basis.

6. in the end the investors, will be required to pay more – whether he likes or dislikes. (as this is approved by the Government)

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Money invested in the supply chain is going to yield better results be it Banks, Builders, Government, Farmers. (quantum is huge)

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Population Dynamics Ruling the World

Population Maths

The other day i was reading some articles on population and made some quick references to Wikipedia. Population of China is just 120 million more than India and in the last decade alone population in India grew by a staggering rate of 17.5 % compared to 5.4% of China.

China & India population account for almost 19.33% and 17.47%  respectively in the world, and immediately after them is USA which almost 25% of India and is just 4.5%.  The Females % in China & India is almost 48 % , where as in USA females are about 50.8% of the whole population.

Rank Country / Territory Population  % of World population Source
World 6,929,400,000 100% US Census Bureau’s World Population Clock
1  Chinan2 1,339,724,852 19.33% 2010 China Census
2  India 1,210,193,422 17.46% Provisional 2011 Indian Census result
3  United States 311,705,000 4.5% Official United States Population Clock
4  Indonesia 237,556,363 3.43% 2010 Indonesian Census
5  Brazil 190,732,694 2.75% 2010 Official Brazilian Census results
6  Pakistan 176,554,000 2.55% Official Pakistani Population clock
7  Nigeria 158,423,000 2.28% UN estimate for 2010
8  Bangladesh 150,863,000 2.18% Official Bangladeshi Population Clock
9  Russia 142,905,200 2.06% 2010 Russian Census
10  Japan 127,950,000 1.85% Official Japan Statistics Bureau

Population of India at Glance

Indian Population shows a different challenge in itself. Firstly the sex ratio is highly skewed, which statistically says there are less number of women as compared to men, and in absolute terms there are about 3,00,00,000 females short.  Even the literacy rate in women is just 65.46% as compared to 82.14 % in men.

In-depth analysis on population, demographics & lifestyle indicators can revel some more fascinating facts about India.