In a free world people should be allowed to take the risks they want to. They would also develop mechanisms that reduce the risk, like buying insurance.

To fully ensure that the risks are onlyborne by the people who do these ill-advised constructions is to reduce the moral hazard caused by disaster relief. However, I do not know if it has been conclusively proven that relief can cause moral hazard - or that lack of relief can reduce risky behavior. Any ideas?

On the other hand, insurance may cause moral hazard in some cases - if its a lossmaking hotel and part of a hotel chain, then the management’s carelessness about the construction of the hotel might go up a notch because the hotel is insured. Which is why we need a well-functioning tort system so that they can be sued by those whose lives were put in danger by bad construction.

Ram, markets aren’t perfect, but they are better than the government.

Some people are dissatisfied with free enterprise if it doesn’t work perfectly and satisfied with government if it works at all

Ravi makes a similar point in another comment.

But dont you need govt support when the people are in trouble (like this 2004 tsunami).Then why shouldnt the govt enforce laws to prevent it.

My guess is that a large number of government officials, including publicly elected ones, must’ve pocketed money to allow those illegal constructions remain in place.

You raised a good point. If the Indian judicial system did function properly, Indian taxpayers could have sued the local municipalities and other govt bodies for not enforcing their own laws. Going further, any punitive damages awarded in such a lawsuit, would be paid by the individuals, out of their own pocket. i.e. the govt bodies should not bear the cost.

Such a lawsuit will send a strong signal to (a) lawmakers, to not make spurious laws (b) law enforcers, to enforce whatever laws remain.