Chapter 12E: The rape of rapeseed and the rise of DLF. Ending in the child eating up the mother. And the regulators agreeing by mistake. Leading to the greatest systemic risk to the economy since independence.
Around 25 years ago – I was invited to an interesting meeting. Seated on the table were the leadership team of DLF on one side and Citicorp on the other. The ask from me was to help find some really needy, really well placed “slum tourism” or “Satyajit ray” kind of story to fund. The idea was to build a narrative for Gurgaon and to develop it into India’s most valuable real estate bubble. The meeting started with William T Comfort sharing a slide that showed HDFC as a subsidiary of Citibank. And went on to highlight a path to billions in wealth creation for both DLF and Citi Group. The plan was to build real estate, and create a market stabilisation fund that would ensure value of the properties didn’t go down because of demand supply mismatch. A key part of the plan was funding of the properties by HDFC Ltd. And funding of the builders and contractors by HDFC Bank. And Citibank marketing the flats to their HNI customers. Total commission in the deal was 33% of property value.
Till then DLF was just a land trader. The former MD of ITC had build Garden Estate at the Delhi Gurgaon border on MG Road and that had been very profitable. JK Chandra, the first BTech from the first IIT at Kharagpur was to lead the transformation of DLF from land trader to property developer. The track to be developed was from Garden Estate to the end of what is now called Golf Course road. It was an audacious plan.
I was more shocked than intrigued. Because it all sounded as if I was in Dubai or Singapore. And where no laws governed the cross border movement of capital. It didn’t matter that property was not a fundamental right in India or that foreigners were prohibited from buying real estate in India. It was all very easy. A peon or driver in Dubai would be given a loan of a million dollars (against a net worth of maybe usd 100) and as a NRI he could buy the property. Simple market intervention strategy. Create demand where none existed. Create a story out of thin air.
Now to find the Satyajit ray story. Someone mentioned that an IIT Professors wife ran a NGO for special children. They may agree to build a school on the land to show that a school existed. Now the problem is that neither the professor nor his wife had any money. No bank was wiling to lend them money. Bill had a simple solution. Ask the branch to cut a cheque for a million dollars and show it as my personal donation to the school. Deal done. Matter closed. In those days FCRA was not a problem. The meeting ended.
A really nice school did come up which works to this date. It was one of those virtues born of vice. But that is where the goodness ended. Bill invited me to lunch and to the next meeting which he called “rape of the rapeseed”.
More later
