Property Allotment - Lottery ??

Considering the mad craze for governmental allocation of plots and flats at controlled prices (with bank financing of even application amount making it a IPO-in-boom-times like gold rush), it seems more like a lottery. Analyzing any such opportunity is like calculating the expected payoff:

The variables are:
- number of likely applications for the given area (say a = 0.2 m)
- number of plots in the area (say b = 100)
- your application (say c = 1)
- expected payoff in case of allotment (difference between allotment & market price say d = Rs. 2 m)
- cost of money (say e = Rs. 2000 (@10% pa of Rs. 40,000 earnest money blocked for 6 months))

The Expected Payoff is :

= (b * c * d / a) - ((a - c)* e / a) = Rs. (1000)

The data points taken are similar to past real examples. In any frenzy, most cases have negative expected payoff and are similar to lottery (but with lower payoff, higher cost of money, and lower number of applications). So, do your calculation before investing !!!

Now just calculate the interest that the government earned by holding the above collected amount for 6 months interest free (assume government bond rate, 10% of property value as earnest money) - You will be totally zapped!