Sunil Sethi: The new landed gentry

If the actual rather than hidden assets of India's rich were ever open to scrutiny, it would be apparent that the phrase 'absentee landlord' is now replaced by 'absentee industrialist'

A friend has been trying to sell some agricultural ancestral land in the Malwa region of southern Punjab. This is fertile rice- and wheat-growing country with high tenancy rates, and his 16-acre holding is big by local standards. To his surprise, however, land values in this rural backwater haven’t registered any major appreciation in recent years. Unlike in earlier generations when farmers bought and sold land with a degree of mutual understanding and trust that made transactions go through quickly, no local farmer has come up with an offer. They simply haven’t the liquidity to do so.

The only bids are from politicians, retired or serving police and revenue officials, a former deputy commissioner and judicial officer. They are the new landed gentry but not one has come up with a clear-cut or straightforward deal. A common scam in these parts, as elsewhere, is to agree on a down payment, or bayana, then demand an extended period to complete the transaction. These deals are fraught with risk. Given high levels of corruption, fraudulent or benami fronts floated by speculators, and delays in district courts, sellers can be locked in litigation for years. However, my friend has noticed two changes since he put up his land for sale: one is the rise in the number of female co-parceners petitioning the tehsildar for inheritance in family property. The second is that the cash component in proportion to stamp duty on land sales keeps rising.

 

There is a lot of black money sloshing about, even in the far-flung countryside where land prices stagnate. As land holdings shrink, farmers are being squeezed out, either scraping a living or falling into debt. Some of the biggest agricultural landowners in Punjab, as in other parts of the country, are political families with industrial connections, or vice versa, that can afford the mechanised infrastructure to make farming profitable.

Other farmers to hit the jackpot are those that own land proximate to urban or industrial areas. There are plenty of speculators and developers – mini-DLFs or Robert Vadras – in every such district, with the magic mantra of “land use conversion” within their easy grasp. Ashok Khemka, the Haryana IAS officer who was summarily transferred for questioning the DLF-Vadra deals, has been quoted as saying that “several hundred crores worth of panchayat lands have been transferred to realtor companies created only days earlier”. These, he predicted, would soon be turned into new farmhouses for Delhi’s elite. This gentry is both land-hungry and cash-rich.

Whereas city governments keep increasing stamp duty on sale of urban property in an effort to shore up revenues, documented fees are low in the villages of Haryana that Mr Khemka mentions. The sums of cash changing hands in agricultural land deals are phenomenal. The figures quoted in the media in the recent scams seem like the tip of the iceberg — a mere 20 per cent of actual transactions, according to realtors operating in wealthy Haryana.

The finance ministry’s white paper on black money published last May is really a document obscured by fifty shades of grey. It blandly acknowledges that rising real-estate prices are a major source of ill-begotten gains through evasion of capital gains tax and unrealistically low stamp duties, but then it drops the subject — diverting into juicier, speculative details of the billions of dollars stashed by Indians abroad (a reported $1,456 billion in Swiss banks alone, more than the alleged assets from Russia, the UK, the Ukraine and China combined).

It doesn’t take uncommon intelligence to speculate that at least some of those billions are from sale and development of real estate, either urban property or rural land in the process of being converted to urban use. If the actual rather than hidden assets of India’s rich and powerful were ever open to scrutiny, it would be apparent that the phrase “absentee landlord” is now replaced by “absentee industrialist” — those who run their landed interests in India, but keep their profits abroad.