Characteristics of land value variation and the urban land market in Kathmandu, Nepal1

Abstract

This paper examines the characteristics of the urban land market in Kathmandu, the capital city of Nepal, in two stages by analysing land value variation in 2002 and 2009. In the first stage, it captures the characteristics of urban spatial structure, using the extended land value gradient model which includes not only the distance from the city centre but also zoning, road accessibility and planning variables as the determinants of land values. The estimates show that urban growth in Kathmandu has recently been characterized by neither centralization nor suburbanization with little shift in urban land demand between central and peripheral areas. Instead, land values have increased significantly across all urban areas, indicating the possibility of overall excess demand for urban plots. Correspondingly, in the second stage whether the supply is sufficient in urban land market is tested using two methods. First, by investigating the data on land pooling projects, urban land value after the project turns out to be greater than the sum of agricultural land value before the project and rural-to-urban conversion costs. Second, the actual or physical distance of urban-rural boundary turns out to be shorter than the theoretical or economic distance derived from the estimates of the extended gradient model. Both results confirm that urban land supply is in a shortage in Kathmandu.