Satyam SinghMBA-IFM

500021421

Metropolitan population of over 6 million

Seventh largest metropolitan area in India

Area: 464 km2 (179 sq mi) Situated in prosperous western

state of Gujarat Founded in 1411 as a walled city Became a center of textile

manufacturing in the 19th century

Grew rapidly in the 20th century mostly using Town Planning Schemes (land readjustment)

A form of land readjustment

A means of expanding urban

infrastructure without

compulsory land acquisition

Promoted as equitable,

participatory and cost-effective

Originally introduced by British

Colonial Government in 1915.

Legislation updated in 1954,

1976 and 1999.

Areas designated for urban expansion in the

city’s development plan

Divided into TP schemes of ~100-250

hectares (250-500 acres), covering ~100-200

parcels

Government pools the land, uses 30-40% for

roads, open space, other public purposes,

including 5-10% for sale.

The remaining 60-70% is returned to original

owners, whose land value has increased

Urban land use is now allowed on these

parcels

Landowner consultation at various stages,

regarding their individual parcels

Land Value Capture in TPS occurs through two means:

o Betterment charges

o Sale of appropriated land

Purpose of betterment charge: to divide the increase in

land value evenly between the landowner and the

government

Betterment Charge = Final LV – Original LV 2

Offset by compensation to landowner for appropriated land,

based on original land value

Farmer A’s original

parcel: 1000 m2@

Rs.200/m2 =

Rs.200,000Rs.200,000

Govt. takes 40% from

all parcels, i.e.

Farmer A loses 400m2

For this, govt. owes

Farmer A Rs. 80,000

(=400m2 X

Rs.200/m2) as

compensation

Farmer A’s remaining

land is worth

Rs.120,000

(=600m2 X

Rs.200/m2)

60%

40%

Rs.120,000

Governmen

t

LandownerRs. 80,000

The govt. estimates the

final price after TPS to be

Rs.500/m2

Farmer A’s remaining

600m2 is now worth

Rs.300,000 (=600m2

X Rs.500/m2)

Increase in land value of

final parcel = Rs.300,000

– Rs.120,000 =

Rs.180,000

Betterment charge = 50%

of increase in LV =

Rs.90,000

Farmer A’s net gain is the

remaining Rs.90,000.

Rs.300,000(from Rs. 120,000)

Rs. 90,000 Governmen

t

Landowner

+ Rs. 180,000

Original and final land values are supposed to be based on recent sales

Sale prices are underreported by as much as 60%

Government instead bases original values on a standard “reckoner”

Final values calculated “in reverse”

Final values on paper are much lower than in reality

Betterment charges are therefore an ineffective means of land value

capture

However, creates the “perception of fairness”

While not emphasized in the rhetoric, land sales are a much

bigger source of land value capture from TP schemes

5-10% of land is “banked” by the govt. for later sale

Land sales have been lucrative for the govt.

o Govt. claims to have collected land worth $100 million from 24 TPS

o e.g. April 2006: 20 parcels sold for $35 million (including one for

Rs.61,000/m2 i.e. $1200/m2) to large real estate firms

It is hard to attribute the land value increase directly to

infrastructure

Simply allowing urban use on this land may account for

much of the land value increase

Land value increases partly due to passage of time in a

rapidly urbanizing context. It is often a very slow process:

final approvals from state governments make take 10+

years (in one case, 26 years). Implementation may have

barely begun after a decade.

Source: Google Earth

November 2003

September 2004

Source: Google Earth

January 2010

The implementation of TPS in Ahmedabad has not been

perfect, but these flaws do not reflect on the concept of land

readjustment or land value capture itself, but on broader

institutional constraints faced in Indian cities.

In Ahmedabad – TPS is an improvement over land acquisition

other cities

May be streamlined by doing away with compensation and

betterment charges, as most benefit comes for land sales by

both original landowners and government.

Land value capture relies on reliable and transparent land

valuation