Does urban rail increase land value in emerging cities? Value uplift from Bangalore Metro

Rohit Sharma,Peter Newman

doi:10.1016/j.tra.2018.08.020

Abstract

This paper seeks to understand how urban rail can influence land value uplift, especially in emerging cities which are largely unstudied. It examines the Bangalore Metro and shows that the uplift from the metro rail was substantial in the ‘catchment area’ and ‘across the city’. The analysis was based on the panel data hedonic price model for around 160,000 apartments over the period 2012–16 and a cross-sectional data hedonic price model for 314,000 apartments in 2016. The panel data resulted in a stronger model and show significant land value increases, even beyond the traditional 500 m catchment. A ‘before’ and ‘after’ from the commencement of the metro rail operations shows a price uplift of 4.5% across the whole city and indicates a major agglomeration economic event resulting in substantial willingness to pay of USD 306 million from the metro rail accessibility. Emerging cities can expect metro rail to substantially improve their economies and other co-benefits as long as finance can be obtained by capturing this value.

Highlights

In the latter half of the 20th century, governments favoured urban road systems and failed to allocate substantial public funds for urban rail projects
A ‘before’ and ‘after’ from the commencement of the metro rail operations shows a price uplift of 4.5% across the whole city and indicates a major agglomeration economic event resulting in substantial willingness to pay of USD 306 million from the metro rail accessibility
This study shows that urban rail has substantially increased property value in Bangalore

Summary

Introduction

In the latter half of the 20th century, governments favoured urban road systems and failed to allocate substantial public funds for urban rail projects. This approach contributed to removal of urban rail across most of the cities around the globe in the 1950’s and 1960’s. Over the last two decades, China and India introduced over 25 high capacity urban rail systems (metro rail) with another 25 currently under construction1 This surge is driven largely by rapidly growing demand for rail in cities due to increasing travel time differentials between urban rail and urban traffic as well as a growing need for dense urban centers that are facilitated by urban rail. An alternative is the need to realize the economic benefits of urban rail and use it for its financing (Debrezion, Pels & Rietveld, 2007; Newman, Kenworthy & Glazebrook, 2013; Newman & Kenworthy, 2015; Sharma, 2018)

Results

Discussion

Conclusion