Fairval

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Cement prices – Alternatives

Posted by fairval on March 11, 2007

Lets see further why capping cement prices was not necessarily the best solution to the problem — and firstly lets define the problem correctly. What is the problem we are trying to solve here – affordable cement? not really.

What we really want to make is afforable housing and affordable infrastructure.

For that there could have been separate policy measures. We all know urban housing prices are driven more by speculative forces. So how about measures like: No house can be sold for a period of 5 years from purchase (or have differential stamp duty depending on frequency of sale, or length of time the house was owned)? Make any house sold within say 3 years be deemed as speculative investment, and attract capital gains of say 50%? Maybe a declaration of all immovable property each time a person wants to buy a house?

If you really want to break the speculative forces in housing market, a lot can be done. But most politicians are hand in glove with builders, so they wouldnt do this. So what is the govt’s favorite way to cool housing prices? Raise interest rates. But that hurts the genuine buyer badly, since he really needs to loan. An investor often does not need a loan to buy a house.

For infra projects, one way is to simply let it be charged off over next 20 or 30 years of BOOT concession period. Other, more complex way, could be to mandate say say of cement at a certain price to govt approved infra projects. But would be perhaps difficult to implement and monitor.

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