Election cash call puts strain on construction, real estate

New Delhi: As India's General Election of 2014 will be arriving soon, the finances of real estate and construction companies have already been squeezed by a sharp economic slowdown. Real estate companies are also diverting funds from housing and other projects towards election campaign contributions.

More than other businesses, Indian developers and contractors are particularly reliant on ties with the government to acquire land or win contracts. If they fund a winner's campaign, the payoffs can be huge.Based on past elections, such companies could end up funding a disproportionate amount of the $5 billion that political parties are likely to spend this time to woo the country's 815 million voters.

"A lot of money will flow from real estate into the elections, much of it unaccounted for," said Santhosh Kumar, Chief Executive Officer of operations at Jones Lang LaSalle India, who advises real estate clients, including developers. "They developers have to fund political candidates to facilitate future opportunities. Whoever comes into power, they have to maintain a relationship,"added Kumar.

According to a 2011 study, 'The level of cement consumption  falls around 12 per cent during elections,' The Anti-corruption groups have also stated, 'Poll funding in India is highly opaque, but political parties are expected to spend around 300 billion rupees for the five-week election starting on April 7.' There is many atimes the legally permissible limit of $114,000 for each of the 543 constituencies, and most of these funds keep coming from the thriving black or underground economy.

Almost one-sixth of such donations to national parties between 2004-05 and 2011-12, a period covering two elections, came from real estate, oil and power firms, a report by the Association for Democratic Reforms showed.