Corruption is making India's real estate costlier - and hurting birth rates, warns Sridhar Vembu

Zoho founder Sridhar Vembu on Sunday argued that political corruption is driving up real estate prices in India, increasing the cost of living and contributing to declining birth rates, particularly in urbanised states such as Tamil Nadu.

Vembu said land prices in cities such as Chennai and Bengaluru rival those in New York despite India's much lower per-capita income levels. 

"Cost of land in our urban areas is far higher than what our GDP per capita would dictate. The ratio of land value to per capita GDP is probably higher in India than anywhere else," he wrote on X.

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Corruption inflates real estate prices

Vembu attributed the trend primarily to corruption-linked money flowing into property markets.

"First, vast sums of political corruption money is parked in real estate. This raises real estate prices, and high real estate prices affect everything downstream," he said.

He also pointed to corruption in building approvals and regulatory processes, saying it raises construction costs on top of already expensive land prices.

"Second, corruption in building approvals and the like - the famous DTCP - raises construction costs, on top of already higher real estate costs," he wrote.

According to Vembu, the effects extend beyond housing.

He said corruption in the enforcement of regulatory compliance for private schools pushes up school fees, while similar issues in healthcare increase medical costs. "Third, corruption in private school regulatory compliance enforcement raises school fees."

"Fourth, corruption in private hospital regulatory compliance enforcement raises health care costs."

He added that retailers face higher rents because of elevated real estate and construction costs, which in turn raise the price of household goods.

"So housing, education, healthcare, and household goods - all of these now cost higher," he wrote.

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Link to falling birth rates

Vembu said the rising cost burden has broader social and demographic consequences.

"As a direct consequence, the economic burden on the average person gets worse. Young people, facing all these costs, postpone marriage, and postpone children or have fewer children," he said.

"That directly affects our demographics."

While the issue affects many parts of the country, Vembu said Tamil Nadu, one of India's most urbanised large states, has been particularly impacted.

Calling corruption "an existential threat to our society," he argued that it is one of the major reasons behind the state's birth rate falling below replacement levels.

"If you worry about the super-low birth rate in Tamil Nadu, way below replacement, understand that corruption raising our cost of living is one of the major causes, not the only cause, but a big one in our context," Vembu wrote.