Real development for real estate

Low incomes, then, need not imply severe shortage of housing and congestion. What then is the reason for congestion? The reason is that total land availability for urban use is low, and the solution is to increase that. It is true that any shift in land use to urban areas from rural areas can affect availability of land for agriculture and hence can reduce agricultural production. However, this is a small opportunity cost. In any case, the loss of domestic agricultural output can be made up by imports. One more concern with a shift of land use is that it is not just a case of lost agricultural output but also a loss of livelihood for a large number in rural areas. This fear seems baseless, given the history of real estate development and new job opportunities in India.

We have so far talked about total land availability for urban use. Consider now allocation of this land — this is where we have the second restrictive role of the current policy of land use in urban areas. Planners decide on allocation of the given total land for different uses: residence, commerce, education, health, entertainment, and so on. In many cities here the emphasis has been on housing. Other uses of space have not received much attention. Space availability for housing is very large relative to that for other uses like commerce. This may have been the appropriate policy in the past. There is, however, need for a change now. The current policy is responsible for the high price of space for commercial purposes relative to the price of space for housing. In view of the substantial price differential, and the fact that bribes are relatively low, we have the result of some residential space being diverted for commercial purposes. This is illegal and needs to be checked. However, the underlying economics cannot be ignored in any future revision of policy.

There has been a debate about whether allocation of resources should be determined by market or by planning. But that is not the real debate. The debate should primarily be about the kind of planning. In the context of land use at present, policy makers favour rural areas over urban areas, and residential use over commercial use within urban areas. This is perhaps in line with egalitarian, or even vote-bank, considerations, but it is short-sighted.

Planning for urbanisation, therefore, needs to change two parameters. One is the current policy of low total availability of land for urban use, and the other is the policy of low allocation of land for commercial use with the total land made available for urban use. Changing the first will reduce the price of space in urban areas in general, and correcting the second will reduce the price of commercial space in particular. The latter is important for a common man, because he not only consumes housing services but also consumes other services and goods, which are available through shops, offices, and so on. A reduction in the price of commercial space will make these other goods and services cheaper to some extent. A revised policy can therefore go a long way in improving the quality of urban life.

The writer teaches at JNU, Delhi gbsingh@mail.jnu.ac.in