Harnessing land value capture: Perspectives from India’s urban rail corridors

Abstract

Urban public transportation remains a challenge for Indian cities. The debilitating state of current public transportation infrastructure as well as rising carbon emissions from private vehicles supports that investments be made in public transportation systems that are both efficient and mitigate environmental challenges of reducing carbon emissions. To address the problem, many Indian cities have been experimenting with metro rail systems. Metro rails are capital intensive projects. Given the budgetary constraints and limitations of external borrowing capacity, state governments in India are resorting to land based finances. Land based financing is predicated on the principle of land value capture. A popular mechanism to implement land based financing is to raise revenues through property development or real-estate cross-subsidisation. This study examined two real-estate cross subsidisation projects that were implemented to raise revenues for Bangalore metro project and Kochi metro project each. The study identified some of the key challenges to land based finances in India. In particular, the study analysed conflicts surrounding urban land management as land acquired under the rubric of ‘public purpose’ were transferred for commercial property development to generate finances for the metro projects. The study calls for evaluation of existing policies of land based financing for urban infrastructure projects.