Too Slow for the Urban March: Litigations and Real Estate Market in Mumbai, India

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The rapid expansion of slums (informal, unapproved housing often disconnected from city infrastructure) in Indian cities is the result of a mismatch between expanding urban job markets and a moribund housing market that is expensive and inelastic. One important cause of expense and delay is litigation. This paper makes a significant contribution in providing an empirical understanding of the impact of litigation on completion times of projects using a unique dataset of ongoing real estate projects in Mumbai.

The PIL system which was designed as a countervailing force to a political system dominated by insiders has given outsiders a voice in urban development. Voice, however, especially when combined with a very slow moving court system has been accompanied by veto power. The accumulation of veto players slows decision making and raises costs.

Using a variety of approaches this paper estimate that litigation increases the time to complete very significantly, by 46% using our preferred estimate. The increase in time to completion is equivalent to an increase in costs of at least 27%. Our conclusion is that the PIL system combined with slow courts has had the unintended consequence of significantly slowing down urban development and pushing more people into slums.

Policy solutions must focus on tackling the two-pronged problem of high incidence of litigation and high pendancy rates in the judiciary. The former require reforms pertaining to land titling and reducing complexity in regulations. The latter require to be addressed through measures that improve the efficacy of an overburdened court system.