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Private sector participation in land development
Vol. 17. No. 2, pp. 5S62, Printed in Great Britain
HABITATINTL.
0197-3975/93
1993
$6.00 + 0.00
Pergamon Press Ltd
Private Sector Participation Development
in Land
Guidelines for Increasing Cooperation between Local Government and Private Developers CHARLES J. BILLAND*
USAZD, New Delhi, India
ABSTRACT
This article examines the roles of the public and private sectors in the development of land with access to potable water, sewage disposal, roads and power. India’s urban population is expected to double over the next 20 years. To meet future household and employment expansion, the need for additional land with infrastructure and municipal services is enormous. In June 1992, India began a process of liberalising its economy. These new -_.--_- from -_--__the ___-centre _______ economic r-m----L nolicier, will substantiallv reduce the funds available to the states, and from the states to local government. The only viable alternative is for state and local governments to foster an environment in which private sector capital and managerial resources are mobilised to replace funding from the centre. This article proposes a series of guidelines to be used by local government1 to increase private sector participation in the land development process. The purpose of this article is to promote policy change at the centre and state government levels, and a dialogue between governments at all levels and private developers, to increase the cooperation between local government and private developers. INTRODUCTION
Approximately 70% of India’s urban households currently reside in costly, unplanned and under-serviced settlements. India’s urban population is expected to double over the next 20 years. Without an adequate supply of additional land with infrastructure and basic municipal services, new household and employment formation will be forced to seek land in new informal settlements primarily on the periphery of India’s urban centres. This unplanned growth will consume premium locations with strategic importance for future economic development, and expose ever larger segments of the population to onerous health and environmental risks.2 Ultimately, the increased cost of servicing these informal settlements *Mr Billand has experience as a developer, mortgage banker, public administrator, certified professional planner, and consultant in housing finance and real estate development. He has worked in India, Egypt, the Caribbean and the United States, and currently serves as the urban advisor to the US Agency for International _~~._..._..___-. Ekvelonment -_.___ r-..-...
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will place an enormous additional burden on already scarce central, state and local public sector resources. Unless the rate of employment formation can keep pace with population growth, India’s economic recovery will faii. The iack of iand with infrastructure and basic municipal services is a major constraint against expanded productivity. Even with new national policies which promote economic growth, sufficient quantities of investment capital and trained staff, good research and development, and improved access to foreign and domestic capital and foreign markets, an inadequate supply of land with access to infrastructure and municipal services will severely constrain increased productivity. It is estimated that approximately 60% of India’s Gross Domestic Product is produced in urban areas with poor access to infrastructure and municipal services. The lack of adequate road access, intermittent power supply, the absence of solid waste collection and inadequate systems for removal and treatment of sewage represent serious productivity constraints. The scale of the problem is enormous. The National Institute for Urban Affairs estimates that an investment of Rs 1500 Crores is required to bring only the existing urban areas to a minimum level of infrastructure. India’s new economic policies rely on underlying principles of a market economy; the government will, therefore, raise more of its resources from domestic competitive markets. Under these new economic policies, funding from the centre to state governments, and from states to development authorities and sewer and water boards will rapidly diminish. The only viable alternative is for state governments and union territories to foster an environment in which private sector capital and human resources are mobilised by local governments to help develop a more efficient, financially sustainable system for the development of land with infrastructure and basic municipal services.
EXAMPLES
OF PUBLIC AND PRIVATE
SECTOR
LAND DEVELOPMENT
The most often cited and most visible example of public sector land development is the Delhi Development Authority. In 1963, the Delhi Development Act placed the acquisition, development and delivery of all land in Delhi under the control of the public sector. Delhi Development Authority’s actions have not contributed to more efficient land markets: e
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domain produced substantial delays in bringing land to market in Delhi. After 15 years, less than 60% of the land identified for acquisition had been acquired. Of the land acquired, only approximately 4% had been distributed .s Priority was given to land uses and locations which generated greater returns to the Delhi Development Authority, rather than responding to social needs and market demands.4 An informal system of land tenure became commonplace as land owners avoided leasehold restrictions against resale and equity appreciation.5 Lack of coordination of land development with the provision of trunk infrastructure resulted in cases where dwellings in formally approved subdivisions stood vacant awaiting connections to trunk infrastructure.6
Due to the increasing gap between land supply and demand, land prices rose rapidly. New low- and middle-income household formation was forced into informal settlements at the urban periphery of Delhi.7
Private Sector Participation in Land Development
55
While private developers have in some cases rightly earned the suspicion of government and the public at large, there are interesting examples where legitimate professional private land developers have delivered serviced land much more efficiently than the public sector. One case in point is in the City of Gurgaon, State of Haryana, which is contiguous to the southwest border of Delhi; In 1975, the state created the Harvana Regulation of ~~-~~-----~ and _._~~~~-~-.-~.----__ , ~~-~Develoument ~ Urban Areas Act, which allowed the private sector to acquire, develop and distribute land side-by-side with the Haryana Urban Development Authority. Since the legitimate private developers were excluded from Delhi, many concentrated their efforts on Gurgaon. The Haryana Urban Development Authority undertook development of 1458 hectares of land in 1970. With the passing of the Act about five years later, a similar amount of land was allocated for private sector development. After 10 years, the public sector was only able to bring 21% of its land to market; while in one-half the time, the private sector had acquired, serviced and distributed 68% of its allotted land.8 The Haryana Urban Development Authority was not required to obtain land use approvals; therefore it had a tendency in some cases to overlook providing plots for lower-income households, public facilities such as school sites, and on-site roads, sewers and water. Surveys revealed great dissatisfaction among residents over the provision of services by the public sector.9 The private sector did somewhat better. Where availability of water, sewers, roads or schools would improve marketing, in some cases the developer used its own funds to provide facilities to keep sales momentum going. In other cases, responsiveness to market demand created a strong incentive for the private developer to pressure the local government into providing the lacking facilities and services. 10
THE IDEAL MODEL FOR INCREASING PRIVATE SECTOR PARTICIPATION
An efficient land market can best be distinguished by two principal factors: first, land with an adequate level of infrastructure and municipal services is available LI price, ._.:__ in the rignr -z-l_* ~ocauon, 1___L1_.- and in sufficient quant1i1es to Iiieet at the rignr demand;” and second, land not needed for direct public uses such as roads, parks and schools, is developed and allocated largely by the private sector in response to the market forces of demand and price.12 Government intervention in land markets is needed to fulfill certain objectives such as shelter solutions for lower-income households, provision of municipal services, and protection of environmentally sensitive areas. However, state government policies which rigidly regulate and control land development, use and allocation create serious inefficiencies such as restricted land supply, higher land prices and greater cost for the provision of infrastructure and municipal services. The public and private sectors each have inherent and differing strengths and weaknesses. These result from the different goal orientations of the two sectors: the public sector is focussed on the social goals of equitable access to land, public health, education, safety and the environment; private sector land developers have as their main goal expedient land development as a means of increasing returns on investment. Under the ideal model, the strengths of public and private sectors would be combined in the hope that each one’s strengths would off-set the weaknesses of the other. The ideal model would accelerate land development by placing capital resource generation and the management of implementation under the leadership and control of the private sector. Ideally, it would allocate responsibility to the
Charles1. Billand
56
Table 1, Ideaf role of local government as a facilitator of land development l l l l
~ 0 * l
Accelerate processing of land use and building sanctions. Coordinate land development with provision of trunk infrastructure. Analyse the impact of land development on the environment and the local economy. Apply similar land use standards for the public and private sectors.‘” *--. I wm ~:L‘~couecwn -**..A:__mu __J repurun~ __^ ._!__ on ^_ ,___I ..-,I ^_I_^^ HSSLSI lanu ._^____.1__^ tlauxicuoub anu prlxb. jJ Improve land title registration system. Improve land mapping and availability of land information. Implement dynamic spatial planning in lieu of static master plans.ls
local government to act as the facilitator of the land development process (see Table 1). The role of local government as facilitator is accepted and promoted by India’s senior policy-makers and the academic community. It is not generally understood, however, at the local government level where public and private interaction takes place; there is a resistance at state and local government levels to greater participation by the private sector. 16 This may be due in large part to the lack of a generally acceptable definition of what a facilitator does to facilitate land development.
GUIDELINES FOR INCREASING PRIVATE SECTOR PARTICIPATION
One of the primary outputs from the seminar on urban land issues’7 held at Udaipur in June 1991, was a proposal for guidelines to increase private sector participation in the land development process - in other words, guidelines for increasing cooperation by creating partnerships between local government and private land developers. 18 In undertaking land development, partnerships are an important principal because each partner is dependent on the actions of the other; and the relationship must be mutually beneficial in that both partners must be willing to give something of value to receive something of value in return. It is in the best interests of local government to be willing to assist a land developer to undertake the delivery of a specific parcel of serviced land, in return for the private developer providing a tangible benefit to the local community. Likewise, it is in the best interests of a private developer to be willing to provide benefits such as plots for low-income households, land for municipal services such as schools, hospitals, police and fire, and/or sensitivity to environmental concerns, in return for benefits such as accelerated approval of land use and hllildino v_.-u *“h
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Table 2 expands on the broader guidelines developed by the participants at the Udaipur land seminar. These guidelines provide: (1) the points of interaction where the public and private sectors are dependent on each; (2) a description of the role of the public sector as facilitator; (3) a description of the role of the private sector as implementor; and (4) possible negotiating points for structuring a partnership between a private land developer and a local government.
Interaction on land assembly
The local government has powers to acquire land for public purposes through eminent domain; a process where the public sector takes privately held land required for the public good with payment to the land owner at market value.19 The developer begins the land development process by acquiring from individual owners a number of smaller contiguous parcels of land. These are assembled
Private Sector Participation in Land Development
57
into a large land holding sufficient in size to carry out development at a neighbourhood, township level, or even an industrial town. In some cases, individual land owners hold-out their property from the assembly in hopes of reaiising a iarger than market return. The local government can negotiate various concessions from the developer by offering to use its powers of eminent domain to take the land from unreasonable land sellers. In many cases, the threat of eminent domain action by the local government on behalf of the developer is sufficient to convince a land owner to accept a reasonable offer. Interaction on land subdivision sanctions
The local government grants land use approval for the developer’s proposed land subdivision based on master plan, zoning and subdivision requirements. To reduce the financial risks associated with land development, and lower the cost of land to the purchaser, the private developer requires land subdivision approval as soon as possible.20 The local government can negotiate various concessions from the developer in return for accelerated approval processing. This can be accomplished if the local government provides simultaneous processing for the various approvals, rather than sequential approvals where processing of one sanction begins only after another has been completed. An alternative used by the Madras Metropolitan Development Authority and now being discussed by the Delhi Development Authority, is to accept the certification of a professional engineer, that the subdivision plans meet all applicable laws and regulations.21 Interaction on provision of trunk infrastructure
The local government coordinates the planning, construction and delivery of off-site trunk water, sewers, roads and power through various state-level boards and municipal undertakings. In some cases, the private developer can provide on-site water supply and sewage treatment. However, the ground water may be of poor quality, or an on-site septic system may contaminate future ground water supplies. In the case of roads and power, the developer has minimal alternatives. Many developers have found that there are marketing advantages to offering land for sale which is serviced by public water and sewers, good road access and a dependable power supply. The iOCd government can negotiate COnCCSSionS from the deveioner ~_.~~~~-o.~~~._ Various I--- in --return for a guarantee of good road access, power supplied by a new electric substation, and connections to off-site trunk water and sewer lines. This will require improved coordination with the state boards and municipal level undertakings.22 However, the benefits to be derived can be substantial. Interaction on land for low-income housing
Local government has a responsibility to implement state policies of providing access by low-income households to developed land. The alternative is rapid growth of informal settlements. The land developer can include a certain percentage of land that is affordable by low-income households in either group building sites, or individual plots. The price for this land can be made affordable by the developer through reduced plot size standards and increased densities; and by cross-subsidising the cost to acquire and service the land for low-income by increasing the sales price for higher-income residential, commercial and industrial land uses (see Fig. 1).
Possible negotiating points Local government can accelerate approvals through one window processing, or certification by registered engineer. Local government can negotiate with board and authorities to guarantee connections Local government can assist developer by acquiring land by eminent domain from owners making unreasonable demands. Developer can provide land for low-income; developer or local government can distribute. Developer can give sites to local govemment; price can be zero to actual cost. Amount of commercial and office land for sale by developer can be adjusted to crosssubsidise provision of lowincome plots and public facilities. Amount of industrial land can be adjusted to cross-subsidise provision of low-income plots and public facilities; can be distributed by developer or local government.
Private developer as implementor Requires approval to reduce risks and costs by proceeding with development as soon as possible. Requires connection to improve marketing by offering public water, sewers, roads and power. Assembles smaller contiguous land parcels into one large parcel; needs assistance where key parcels are held back due to unreasonable sale demands. Can include some percentage of land affordable by low-income through cross-subsidy. Can include sites for schools, parks, hospitals, clinics, police and fire services. Can include sites for commercial and office development.
Can include sites for industrial uses.
Local government as facilitator Grants approval based on master plan and zoning requirements.
Coordinates with boards and authorities to provide trunk infrastructure. Has powers to acquire land for public purposes by eminent domain.
Has responsibility to provide access by low-income to land with infrastructure and basic municipal services. Has res~nsibility to provide facilities for education, recreation, health and safety. Has responsibility to provide convenient access to goods, services and employment.
Has responsibility to provide access to employment; can attract industries by offering land with services
Points of interaction
Land subdivision sanctions
Provision of trunk infrastructure
Land assembly
Land for low-income housing
Land for public facilities
Land for commercial uses
Land for industrial uses
Table 2. Guidelines to increase cooperation between local government and private developers
Private Sector Participation in Land Development
59
REGISTER TODAY FOR YOUR EWS FLAT
Total cost of flat : Only Rs. 15,000. Fig. 1. A private developer has entered into an agreement with a development authority in which 150 flats of 270 ft* (25 m2) will be sold to low-income households for Rs 15,000. The construction cost is estimated to be approximately Rs 135,000. The difference is cross-subsidised through the sale of serviced land and houses at market prices. Rs 15,000 financed at 12.5% interest over 20 years is affordable by a family earning Rs 500 per month - affordable by the twentieth percentile of India’s population by income.
By providing accelerated land use sanctions, assistance with land assembly and a guarantee of off-site trunk infrastructure, the local government can negotiate for a percentage of the subdivided land to be affordable to Iow-income households. The amount of land for low-income groups will depend on the cost to acquire and service the land, minus the affordable price to be paid by low-income groups. The market value of the serviced land for higher-income residential, commercial and industrial uses must be increased to subsidise this difference. The rights to distribute the land can be designated to either the local government or the land developer. There is a public relations value to be gained by the developer if he can demonstrate a commitment to providing affordable housing for the low-income.
The local government has the responsibility for providing access to education, recreation, health care and safety facilities such as schools, parks and playgrounds, clinics and hospitals, police and fire stations. The land developer can include sites for these facilities in the township plan. By providing accelerated land use sanctions, assistance with land assembly and a guarantee of off-site trunk infrastructure, the local government can negotiate for not only public facility sites, but in some cases for the actual construction of a school, library, police or fire station. There are distinct marketing advantages for the developer to offer land buyers immediate access to certain public facilities. As was the case in Gurgaon, availability of schools, parks and recreational facilities helped to increase land sales.23
60
Charles J. Billand
Interaction on land for commercial uses
Local government has the responsibility to provide convenient access to goods and services. Commercial and office land uses produce new job formations, and potential tax revenue income for state and local government. The land developer can include sites for commercial and office development. The local government can negotiate for concessions from the developer by providing accelerated land-use sanctions, assistance with land assembly and a guarantee of off-site trunk infrastructure. These can include the amount of land available for commercial and office uses; and a sharing of commercial land sale proceeds to increase the percentage of low-income housing and/or fund the construction of public facilities such as schools, hospitals, police and fire stations. The rights to distribute the commercial and office land can be designated to either the local government or the land developer. It is noteworthy that there is a higher future value to be realised by either the local government or the developer, in holding some key commercial and office land off the market until a certain level of development growth is achieved. Interaction on land for industrial uses
The local government is responsible for providing access to employment opportunities for current and future household income needs. With future industrial sites identified, local government can promote employment generation by attracting key industries through reduced costs for acquisition of serviced land and choice locations. Developers can provide industrial sites when preparing township plans. By providing accelerated land use sanctions, assistance with land assembly and a guarantee of off-site trunk infrastructure, the local government can negotiate for concessions from the developer. These can include the amount of land available for industrial uses; the rights to distribute some or all of the land; and similar to commercial land, a sharing of industrial land sale proceeds to increase the percentage of low-income housing and/or fund the construction of public facilities such as schools, hospitals, police and fire stations. As with commercial land, there is a higher future value to be realised by either the local government or the developer, in holding some key industrial land off the market until a certain level of development growth is achieved.
THE NEED TO PROMOTE
GUIDELINES
This article has been published to promote a dialogue at all levels of the public and private sectors, and among the academic community interested in urban development issues in India. The relationship between local government and private developers is at this point largely adversarial. If local government is to take on the role of facilitator, this relationship must be changed to one of mutual cooperation and support.24 The key to changing this relationship to one of cooperation and support is adopting state government policies which promote a clear understanding of the roles of the respective participants. In broad terms, these roles are defined as the public sector as facilitator and the private sector as implementor. Facilitation in the abstract is easy to understand. Public sector facilitation of private sector implementation, however, is not a clear and simple concept. The participants at the Udaipur land seminar crafted a broad description for guidelines to assist local government with defining its role as facilitator. Those
Private Sector Participation in Land Development
61
guidelines were expanded in this paper to promote a thorough examination and discussion by a broader audience of policy-makers, users and academicians. Policy reforms at the state level for increasing cooperation between local government and private developers are essential to increasing the supply of land with infrastructure and municipal services. The time is short; the challenge is enormous; unnecessary delay exposes ever larger segments of India’s population to onerous health and environmental risks, and threatens India’s economic recovery program. NOTES 1.
2.
3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
13.
14.
15.
16.
The term ‘local government’ is used here to mean the local public institution charged with the responsibility for land development and management. In India, there may be several local level institutions with responsibilities for various aspects of municipal management, land-use control and development, and the provision, maintenance and operation of public services. These may include municipal corporations, city level development authorities and trusts, state level sewer and water boards, and other municipal service undertakings. Lack of coordination between these local bodies is a primary constraint against more efficient land development and management. The informal settlement pattern is one of mixed land uses: households residing side-by-side, within and above commercial and industrial establishments. While this represents certain efficiencies in land use. commutation, and access to the labour force, there are onerous health and environmental costs. Households exceed both commerce and industry as the leading urban environmental polluter: 6&80% of surface water pollution: 60-80% of solid waste generation; 20-50% of hazardous waste generation; 7&90% of groundwater contamination. [David Foster, presentation on “Urban presented at USAID Regional Housing and Urban Development Environmental Management”, Policy Conference on Urban Environment (Bangkok, Thailand, 1992).] The impact of concentrated household, commercial and industrial pollution on the informal sector population results in increased morbidity and mortality rates, loss of productive work force, increased productivity cost and decreased economic competitiveness. “Policy of Land Acquisition and Development: Analysis of an Indian Experience” B.P. Acharya, (Working Paper, Center of Urban Studies and Urban Planning, Hong Kong, 1987). Charles J. Billand, “Delhi Case Study: Formal Serviced Land Delivery” (Prepared for AID, PADCO, Washington, DC, 1990). Banashree Mitra, “Land Supply for Low Income Housing in Delhi”, in: The New Suburbs, Edited by P. Baross and J. Van der Linden (New Delhi, India, 1989). Billand, 1990 (see note 4). Mitra, 1989 (see note 5). A. Bansal, “Acquisition, Development and Colonisation of Land in Gurgaon: the Impact of Strategies and Programmes” (Research Study for India Human Settlement Program, New Delhi, India, 1986). Ibid. Billand, 1990 (see note 4). for Third Annual David E. Dowall, “Urban Land Policy Issues in Asia”, A discussion paper prepared Asian Regional Policy Seminar, AID, Bangkok (Chiang Mai, Thailand, 1990). Duane Kissick and Matthew Westfall, Theme paper prepared for Serviced Land Delivery Program Consensus Building at the Urban Land Seminar at Udaipur, Rajasthan, India (Prepared for AID, PADCO, Washington, DC, 1991). The lack of flexible land use standards acts as an impediment against private sector developers providing land to house the lower-income. Current land use planning standards require a minimum plot size of 200 m*. The cost of a serviced plot of this size is unaffordable by low-income households. Public sector housing boards and development authorities receive waivers from this planning standard to provide 20 and 25 m* plots for the low-income. The private sector is generally unable to obtain these same waivers, and must exclude low-income groups from its development schemes. There is a lack of information concerning how land markets work. Many land transactions and prices are either not recorded or misreported. Neither the private sector developer nor the ultimate plot buyer can evaluate prices and make economically sound choices when information is unavailable. This contributes to land speculation in two ways: sales agents are able to manipulate the actual demand for land in the absence of accurate and current transaction and price information; land transactions with black money can take place without official scrutiny. The concept of master planning must be replaced by dynamic spatial planning. Master planning cannot keep pace with urban growth; planning is, therefore, always lagging behind, which directly contributes to the growth of costly, unplanned and under-serviced informal communities. Under dynamic spatial planning, local government develops a long-range vision for the city, but concentrates its planning resources on short-term issues: coordination of spatial planning with a realistic estimate of the availability of infrastructure; focussing the planning process on the areas of the city which are under the most severe development pressures; planning fo; change. Partnerships in Land Development” (Prepared Lee Baker and David Sims, “India Public/Private for AID, PADCO, Washington, DC, 1991). Alan Carroll, Robert Olsen and John Leatherdale, “Constraints Affecting the Efficiency of Urban Land Markets in India” (Prepared for AID, PADCO, Washington, DC, 1991).
HAB17:2-E
62 17.
18.
19.
20.
21. 22.
23. 24.
Charles J. Billand
The idea for a series of seminars on urban land issues grew out of an Asian regional policy seminar on land sponsored by AID’s Office of Housing and Urban Programs for Asia. After three days of deliberation on land within the Asian regional context, the Indian delegation decided to reconvene the following year to examine land in India. [Charles J. Billand, “Chiang Mai Land Policy Conference: Impact on India Program” (Prepared for AID PADCO, Washington, DC, 1990).] With the Ministry of Urban Development and India’s National Housing Bank acting as co-sponsors, a core group of seminar participants was formed. The group consisted of key public and private sector actors in India’s land development process. To accommodate India’s vast size, regional distinctions, and the fact that land is a state subject, seminars were held in Udaipur, Delhi, Aurangabad, and Bangalore. The core group was joined at each location by key representatives of state and local government, and private sector land developers. The purpose of the seminar series was to clearly define the urban policy reforms required to increase the supply of land with access to infrastructure and municipal services. In a study prepared by Baker and Sims (see note 16). seven currently on-going examples were identified and analysed. in which the public and private sectors had created partnerships to carry out land development activities in India. Broadly, these included integrated township development schemes, land readjustment schemes, guided urban development, and the use of housing cooperatives and non-governmental organisations (NGOs) to deliver land. It should be noted that the guidelines for structuring partnerships between local governments and either housing cooperatives or NGOs will be substantially different than those proposed here for private developers. Since the goals and objectives of cooperatives and NGOs differ greatly from land developers, the incentives for creating a mutually beneficial relationship will differ substantially. What housing co-ops and NGOs are willing to provide to local government, and what they wish in return, are quite different from land developers. The fourth land seminar, held at Bangalore in June 1992, identified a number of policy reforms related to the legal and institutional framework for urban land management in India. A number of those directly related to land acquisition (i) The Land Acquisition Act of 1894 contains provisions which distort the amount to be paid by the public sector to the land owner. These distortions delay acquisition because of lengthy court cases. There is a need for a new Urban Land Acquisition Act which corrects these distortions in setting the price, and provides an alternative for private sector assembly of land for urban development. (ii) In many cases the Urban Land Ceiling Act negatively impacts on the public sector’s ability to acquire land. The participants recommended scrapping the act in favour of a tax on vacant land. The funds generated by this tax will be used to accomplish the social objectives of the Act: equitable access by the poor to land. Administrative delays of up to five years in the review and approval of land use and building sanctions increase the financial risk for private developers and the cost of serviced land. These delays are caused by inefficient and arbitrary administration of land-use controls, and because of a lack of skills at the local government level [Carroll et al., 1991 (see note 16)]. The front-end capital required to hold land and secure planning, engineering and architectural services may not be recovered if the land use and building sanctions are not ultimately approved. The additional cost for financing this front end risk capital can be substantial, and will be passed on to the land purchaser if and when the land development proposal is approved. Baker and Sims. 1991 (see note 16). The coordination among the urban development authorities, the local municipal bodies, the revenue authorities and the infrastructure agencies is in general quite poor in all the cities. As a result, at all stages of the land development process, from the preparation of master plans/development plans for the metropolitan area. smaller area level plans like zonal plans or Town Planning Schemes, or granting of layout permissions and building permissions, there are inordinate delays. Most of these delays are procedural. For example. the master plans and zonal plans must be approved by the state government in every state and it takes from three to seven years for the completion of the entire process. Denish Mehta and Mira Mehta, “Land for Shelter Delivery of Serviced Land in Metropolitan India” (Prepared for AID Centre for Environmental Planning, Ahmedabad, India, 1991). Billand, 1990 (see note 4). Carroll et al.. 1991 (see note 16).
HABITATINTL.
0197-3975/93
1993
$6.00 + 0.00
Pergamon Press Ltd
Private Sector Participation Development
in Land
Guidelines for Increasing Cooperation between Local Government and Private Developers CHARLES J. BILLAND*
USAZD, New Delhi, India
ABSTRACT
This article examines the roles of the public and private sectors in the development of land with access to potable water, sewage disposal, roads and power. India’s urban population is expected to double over the next 20 years. To meet future household and employment expansion, the need for additional land with infrastructure and municipal services is enormous. In June 1992, India began a process of liberalising its economy. These new -_.--_- from -_--__the ___-centre _______ economic r-m----L nolicier, will substantiallv reduce the funds available to the states, and from the states to local government. The only viable alternative is for state and local governments to foster an environment in which private sector capital and managerial resources are mobilised to replace funding from the centre. This article proposes a series of guidelines to be used by local government1 to increase private sector participation in the land development process. The purpose of this article is to promote policy change at the centre and state government levels, and a dialogue between governments at all levels and private developers, to increase the cooperation between local government and private developers. INTRODUCTION
Approximately 70% of India’s urban households currently reside in costly, unplanned and under-serviced settlements. India’s urban population is expected to double over the next 20 years. Without an adequate supply of additional land with infrastructure and basic municipal services, new household and employment formation will be forced to seek land in new informal settlements primarily on the periphery of India’s urban centres. This unplanned growth will consume premium locations with strategic importance for future economic development, and expose ever larger segments of the population to onerous health and environmental risks.2 Ultimately, the increased cost of servicing these informal settlements *Mr Billand has experience as a developer, mortgage banker, public administrator, certified professional planner, and consultant in housing finance and real estate development. He has worked in India, Egypt, the Caribbean and the United States, and currently serves as the urban advisor to the US Agency for International _~~._..._..___-. Ekvelonment -_.___ r-..-...
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53
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Charles J. Billand
54
will place an enormous additional burden on already scarce central, state and local public sector resources. Unless the rate of employment formation can keep pace with population growth, India’s economic recovery will faii. The iack of iand with infrastructure and basic municipal services is a major constraint against expanded productivity. Even with new national policies which promote economic growth, sufficient quantities of investment capital and trained staff, good research and development, and improved access to foreign and domestic capital and foreign markets, an inadequate supply of land with access to infrastructure and municipal services will severely constrain increased productivity. It is estimated that approximately 60% of India’s Gross Domestic Product is produced in urban areas with poor access to infrastructure and municipal services. The lack of adequate road access, intermittent power supply, the absence of solid waste collection and inadequate systems for removal and treatment of sewage represent serious productivity constraints. The scale of the problem is enormous. The National Institute for Urban Affairs estimates that an investment of Rs 1500 Crores is required to bring only the existing urban areas to a minimum level of infrastructure. India’s new economic policies rely on underlying principles of a market economy; the government will, therefore, raise more of its resources from domestic competitive markets. Under these new economic policies, funding from the centre to state governments, and from states to development authorities and sewer and water boards will rapidly diminish. The only viable alternative is for state governments and union territories to foster an environment in which private sector capital and human resources are mobilised by local governments to help develop a more efficient, financially sustainable system for the development of land with infrastructure and basic municipal services.
EXAMPLES
OF PUBLIC AND PRIVATE
SECTOR
LAND DEVELOPMENT
The most often cited and most visible example of public sector land development is the Delhi Development Authority. In 1963, the Delhi Development Act placed the acquisition, development and delivery of all land in Delhi under the control of the public sector. Delhi Development Authority’s actions have not contributed to more efficient land markets: e
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domain produced substantial delays in bringing land to market in Delhi. After 15 years, less than 60% of the land identified for acquisition had been acquired. Of the land acquired, only approximately 4% had been distributed .s Priority was given to land uses and locations which generated greater returns to the Delhi Development Authority, rather than responding to social needs and market demands.4 An informal system of land tenure became commonplace as land owners avoided leasehold restrictions against resale and equity appreciation.5 Lack of coordination of land development with the provision of trunk infrastructure resulted in cases where dwellings in formally approved subdivisions stood vacant awaiting connections to trunk infrastructure.6
Due to the increasing gap between land supply and demand, land prices rose rapidly. New low- and middle-income household formation was forced into informal settlements at the urban periphery of Delhi.7
Private Sector Participation in Land Development
55
While private developers have in some cases rightly earned the suspicion of government and the public at large, there are interesting examples where legitimate professional private land developers have delivered serviced land much more efficiently than the public sector. One case in point is in the City of Gurgaon, State of Haryana, which is contiguous to the southwest border of Delhi; In 1975, the state created the Harvana Regulation of ~~-~~-----~ and _._~~~~-~-.-~.----__ , ~~-~Develoument ~ Urban Areas Act, which allowed the private sector to acquire, develop and distribute land side-by-side with the Haryana Urban Development Authority. Since the legitimate private developers were excluded from Delhi, many concentrated their efforts on Gurgaon. The Haryana Urban Development Authority undertook development of 1458 hectares of land in 1970. With the passing of the Act about five years later, a similar amount of land was allocated for private sector development. After 10 years, the public sector was only able to bring 21% of its land to market; while in one-half the time, the private sector had acquired, serviced and distributed 68% of its allotted land.8 The Haryana Urban Development Authority was not required to obtain land use approvals; therefore it had a tendency in some cases to overlook providing plots for lower-income households, public facilities such as school sites, and on-site roads, sewers and water. Surveys revealed great dissatisfaction among residents over the provision of services by the public sector.9 The private sector did somewhat better. Where availability of water, sewers, roads or schools would improve marketing, in some cases the developer used its own funds to provide facilities to keep sales momentum going. In other cases, responsiveness to market demand created a strong incentive for the private developer to pressure the local government into providing the lacking facilities and services. 10
THE IDEAL MODEL FOR INCREASING PRIVATE SECTOR PARTICIPATION
An efficient land market can best be distinguished by two principal factors: first, land with an adequate level of infrastructure and municipal services is available LI price, ._.:__ in the rignr -z-l_* ~ocauon, 1___L1_.- and in sufficient quant1i1es to Iiieet at the rignr demand;” and second, land not needed for direct public uses such as roads, parks and schools, is developed and allocated largely by the private sector in response to the market forces of demand and price.12 Government intervention in land markets is needed to fulfill certain objectives such as shelter solutions for lower-income households, provision of municipal services, and protection of environmentally sensitive areas. However, state government policies which rigidly regulate and control land development, use and allocation create serious inefficiencies such as restricted land supply, higher land prices and greater cost for the provision of infrastructure and municipal services. The public and private sectors each have inherent and differing strengths and weaknesses. These result from the different goal orientations of the two sectors: the public sector is focussed on the social goals of equitable access to land, public health, education, safety and the environment; private sector land developers have as their main goal expedient land development as a means of increasing returns on investment. Under the ideal model, the strengths of public and private sectors would be combined in the hope that each one’s strengths would off-set the weaknesses of the other. The ideal model would accelerate land development by placing capital resource generation and the management of implementation under the leadership and control of the private sector. Ideally, it would allocate responsibility to the
Charles1. Billand
56
Table 1, Ideaf role of local government as a facilitator of land development l l l l
~ 0 * l
Accelerate processing of land use and building sanctions. Coordinate land development with provision of trunk infrastructure. Analyse the impact of land development on the environment and the local economy. Apply similar land use standards for the public and private sectors.‘” *--. I wm ~:L‘~couecwn -**..A:__mu __J repurun~ __^ ._!__ on ^_ ,___I ..-,I ^_I_^^ HSSLSI lanu ._^____.1__^ tlauxicuoub anu prlxb. jJ Improve land title registration system. Improve land mapping and availability of land information. Implement dynamic spatial planning in lieu of static master plans.ls
local government to act as the facilitator of the land development process (see Table 1). The role of local government as facilitator is accepted and promoted by India’s senior policy-makers and the academic community. It is not generally understood, however, at the local government level where public and private interaction takes place; there is a resistance at state and local government levels to greater participation by the private sector. 16 This may be due in large part to the lack of a generally acceptable definition of what a facilitator does to facilitate land development.
GUIDELINES FOR INCREASING PRIVATE SECTOR PARTICIPATION
One of the primary outputs from the seminar on urban land issues’7 held at Udaipur in June 1991, was a proposal for guidelines to increase private sector participation in the land development process - in other words, guidelines for increasing cooperation by creating partnerships between local government and private land developers. 18 In undertaking land development, partnerships are an important principal because each partner is dependent on the actions of the other; and the relationship must be mutually beneficial in that both partners must be willing to give something of value to receive something of value in return. It is in the best interests of local government to be willing to assist a land developer to undertake the delivery of a specific parcel of serviced land, in return for the private developer providing a tangible benefit to the local community. Likewise, it is in the best interests of a private developer to be willing to provide benefits such as plots for low-income households, land for municipal services such as schools, hospitals, police and fire, and/or sensitivity to environmental concerns, in return for benefits such as accelerated approval of land use and hllildino v_.-u *“h
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Table 2 expands on the broader guidelines developed by the participants at the Udaipur land seminar. These guidelines provide: (1) the points of interaction where the public and private sectors are dependent on each; (2) a description of the role of the public sector as facilitator; (3) a description of the role of the private sector as implementor; and (4) possible negotiating points for structuring a partnership between a private land developer and a local government.
Interaction on land assembly
The local government has powers to acquire land for public purposes through eminent domain; a process where the public sector takes privately held land required for the public good with payment to the land owner at market value.19 The developer begins the land development process by acquiring from individual owners a number of smaller contiguous parcels of land. These are assembled
Private Sector Participation in Land Development
57
into a large land holding sufficient in size to carry out development at a neighbourhood, township level, or even an industrial town. In some cases, individual land owners hold-out their property from the assembly in hopes of reaiising a iarger than market return. The local government can negotiate various concessions from the developer by offering to use its powers of eminent domain to take the land from unreasonable land sellers. In many cases, the threat of eminent domain action by the local government on behalf of the developer is sufficient to convince a land owner to accept a reasonable offer. Interaction on land subdivision sanctions
The local government grants land use approval for the developer’s proposed land subdivision based on master plan, zoning and subdivision requirements. To reduce the financial risks associated with land development, and lower the cost of land to the purchaser, the private developer requires land subdivision approval as soon as possible.20 The local government can negotiate various concessions from the developer in return for accelerated approval processing. This can be accomplished if the local government provides simultaneous processing for the various approvals, rather than sequential approvals where processing of one sanction begins only after another has been completed. An alternative used by the Madras Metropolitan Development Authority and now being discussed by the Delhi Development Authority, is to accept the certification of a professional engineer, that the subdivision plans meet all applicable laws and regulations.21 Interaction on provision of trunk infrastructure
The local government coordinates the planning, construction and delivery of off-site trunk water, sewers, roads and power through various state-level boards and municipal undertakings. In some cases, the private developer can provide on-site water supply and sewage treatment. However, the ground water may be of poor quality, or an on-site septic system may contaminate future ground water supplies. In the case of roads and power, the developer has minimal alternatives. Many developers have found that there are marketing advantages to offering land for sale which is serviced by public water and sewers, good road access and a dependable power supply. The iOCd government can negotiate COnCCSSionS from the deveioner ~_.~~~~-o.~~~._ Various I--- in --return for a guarantee of good road access, power supplied by a new electric substation, and connections to off-site trunk water and sewer lines. This will require improved coordination with the state boards and municipal level undertakings.22 However, the benefits to be derived can be substantial. Interaction on land for low-income housing
Local government has a responsibility to implement state policies of providing access by low-income households to developed land. The alternative is rapid growth of informal settlements. The land developer can include a certain percentage of land that is affordable by low-income households in either group building sites, or individual plots. The price for this land can be made affordable by the developer through reduced plot size standards and increased densities; and by cross-subsidising the cost to acquire and service the land for low-income by increasing the sales price for higher-income residential, commercial and industrial land uses (see Fig. 1).
Possible negotiating points Local government can accelerate approvals through one window processing, or certification by registered engineer. Local government can negotiate with board and authorities to guarantee connections Local government can assist developer by acquiring land by eminent domain from owners making unreasonable demands. Developer can provide land for low-income; developer or local government can distribute. Developer can give sites to local govemment; price can be zero to actual cost. Amount of commercial and office land for sale by developer can be adjusted to crosssubsidise provision of lowincome plots and public facilities. Amount of industrial land can be adjusted to cross-subsidise provision of low-income plots and public facilities; can be distributed by developer or local government.
Private developer as implementor Requires approval to reduce risks and costs by proceeding with development as soon as possible. Requires connection to improve marketing by offering public water, sewers, roads and power. Assembles smaller contiguous land parcels into one large parcel; needs assistance where key parcels are held back due to unreasonable sale demands. Can include some percentage of land affordable by low-income through cross-subsidy. Can include sites for schools, parks, hospitals, clinics, police and fire services. Can include sites for commercial and office development.
Can include sites for industrial uses.
Local government as facilitator Grants approval based on master plan and zoning requirements.
Coordinates with boards and authorities to provide trunk infrastructure. Has powers to acquire land for public purposes by eminent domain.
Has responsibility to provide access by low-income to land with infrastructure and basic municipal services. Has res~nsibility to provide facilities for education, recreation, health and safety. Has responsibility to provide convenient access to goods, services and employment.
Has responsibility to provide access to employment; can attract industries by offering land with services
Points of interaction
Land subdivision sanctions
Provision of trunk infrastructure
Land assembly
Land for low-income housing
Land for public facilities
Land for commercial uses
Land for industrial uses
Table 2. Guidelines to increase cooperation between local government and private developers
Private Sector Participation in Land Development
59
REGISTER TODAY FOR YOUR EWS FLAT
Total cost of flat : Only Rs. 15,000. Fig. 1. A private developer has entered into an agreement with a development authority in which 150 flats of 270 ft* (25 m2) will be sold to low-income households for Rs 15,000. The construction cost is estimated to be approximately Rs 135,000. The difference is cross-subsidised through the sale of serviced land and houses at market prices. Rs 15,000 financed at 12.5% interest over 20 years is affordable by a family earning Rs 500 per month - affordable by the twentieth percentile of India’s population by income.
By providing accelerated land use sanctions, assistance with land assembly and a guarantee of off-site trunk infrastructure, the local government can negotiate for a percentage of the subdivided land to be affordable to Iow-income households. The amount of land for low-income groups will depend on the cost to acquire and service the land, minus the affordable price to be paid by low-income groups. The market value of the serviced land for higher-income residential, commercial and industrial uses must be increased to subsidise this difference. The rights to distribute the land can be designated to either the local government or the land developer. There is a public relations value to be gained by the developer if he can demonstrate a commitment to providing affordable housing for the low-income.
The local government has the responsibility for providing access to education, recreation, health care and safety facilities such as schools, parks and playgrounds, clinics and hospitals, police and fire stations. The land developer can include sites for these facilities in the township plan. By providing accelerated land use sanctions, assistance with land assembly and a guarantee of off-site trunk infrastructure, the local government can negotiate for not only public facility sites, but in some cases for the actual construction of a school, library, police or fire station. There are distinct marketing advantages for the developer to offer land buyers immediate access to certain public facilities. As was the case in Gurgaon, availability of schools, parks and recreational facilities helped to increase land sales.23
60
Charles J. Billand
Interaction on land for commercial uses
Local government has the responsibility to provide convenient access to goods and services. Commercial and office land uses produce new job formations, and potential tax revenue income for state and local government. The land developer can include sites for commercial and office development. The local government can negotiate for concessions from the developer by providing accelerated land-use sanctions, assistance with land assembly and a guarantee of off-site trunk infrastructure. These can include the amount of land available for commercial and office uses; and a sharing of commercial land sale proceeds to increase the percentage of low-income housing and/or fund the construction of public facilities such as schools, hospitals, police and fire stations. The rights to distribute the commercial and office land can be designated to either the local government or the land developer. It is noteworthy that there is a higher future value to be realised by either the local government or the developer, in holding some key commercial and office land off the market until a certain level of development growth is achieved. Interaction on land for industrial uses
The local government is responsible for providing access to employment opportunities for current and future household income needs. With future industrial sites identified, local government can promote employment generation by attracting key industries through reduced costs for acquisition of serviced land and choice locations. Developers can provide industrial sites when preparing township plans. By providing accelerated land use sanctions, assistance with land assembly and a guarantee of off-site trunk infrastructure, the local government can negotiate for concessions from the developer. These can include the amount of land available for industrial uses; the rights to distribute some or all of the land; and similar to commercial land, a sharing of industrial land sale proceeds to increase the percentage of low-income housing and/or fund the construction of public facilities such as schools, hospitals, police and fire stations. As with commercial land, there is a higher future value to be realised by either the local government or the developer, in holding some key industrial land off the market until a certain level of development growth is achieved.
THE NEED TO PROMOTE
GUIDELINES
This article has been published to promote a dialogue at all levels of the public and private sectors, and among the academic community interested in urban development issues in India. The relationship between local government and private developers is at this point largely adversarial. If local government is to take on the role of facilitator, this relationship must be changed to one of mutual cooperation and support.24 The key to changing this relationship to one of cooperation and support is adopting state government policies which promote a clear understanding of the roles of the respective participants. In broad terms, these roles are defined as the public sector as facilitator and the private sector as implementor. Facilitation in the abstract is easy to understand. Public sector facilitation of private sector implementation, however, is not a clear and simple concept. The participants at the Udaipur land seminar crafted a broad description for guidelines to assist local government with defining its role as facilitator. Those
Private Sector Participation in Land Development
61
guidelines were expanded in this paper to promote a thorough examination and discussion by a broader audience of policy-makers, users and academicians. Policy reforms at the state level for increasing cooperation between local government and private developers are essential to increasing the supply of land with infrastructure and municipal services. The time is short; the challenge is enormous; unnecessary delay exposes ever larger segments of India’s population to onerous health and environmental risks, and threatens India’s economic recovery program. NOTES 1.
2.
3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
13.
14.
15.
16.
The term ‘local government’ is used here to mean the local public institution charged with the responsibility for land development and management. In India, there may be several local level institutions with responsibilities for various aspects of municipal management, land-use control and development, and the provision, maintenance and operation of public services. These may include municipal corporations, city level development authorities and trusts, state level sewer and water boards, and other municipal service undertakings. Lack of coordination between these local bodies is a primary constraint against more efficient land development and management. The informal settlement pattern is one of mixed land uses: households residing side-by-side, within and above commercial and industrial establishments. While this represents certain efficiencies in land use. commutation, and access to the labour force, there are onerous health and environmental costs. Households exceed both commerce and industry as the leading urban environmental polluter: 6&80% of surface water pollution: 60-80% of solid waste generation; 20-50% of hazardous waste generation; 7&90% of groundwater contamination. [David Foster, presentation on “Urban presented at USAID Regional Housing and Urban Development Environmental Management”, Policy Conference on Urban Environment (Bangkok, Thailand, 1992).] The impact of concentrated household, commercial and industrial pollution on the informal sector population results in increased morbidity and mortality rates, loss of productive work force, increased productivity cost and decreased economic competitiveness. “Policy of Land Acquisition and Development: Analysis of an Indian Experience” B.P. Acharya, (Working Paper, Center of Urban Studies and Urban Planning, Hong Kong, 1987). Charles J. Billand, “Delhi Case Study: Formal Serviced Land Delivery” (Prepared for AID, PADCO, Washington, DC, 1990). Banashree Mitra, “Land Supply for Low Income Housing in Delhi”, in: The New Suburbs, Edited by P. Baross and J. Van der Linden (New Delhi, India, 1989). Billand, 1990 (see note 4). Mitra, 1989 (see note 5). A. Bansal, “Acquisition, Development and Colonisation of Land in Gurgaon: the Impact of Strategies and Programmes” (Research Study for India Human Settlement Program, New Delhi, India, 1986). Ibid. Billand, 1990 (see note 4). for Third Annual David E. Dowall, “Urban Land Policy Issues in Asia”, A discussion paper prepared Asian Regional Policy Seminar, AID, Bangkok (Chiang Mai, Thailand, 1990). Duane Kissick and Matthew Westfall, Theme paper prepared for Serviced Land Delivery Program Consensus Building at the Urban Land Seminar at Udaipur, Rajasthan, India (Prepared for AID, PADCO, Washington, DC, 1991). The lack of flexible land use standards acts as an impediment against private sector developers providing land to house the lower-income. Current land use planning standards require a minimum plot size of 200 m*. The cost of a serviced plot of this size is unaffordable by low-income households. Public sector housing boards and development authorities receive waivers from this planning standard to provide 20 and 25 m* plots for the low-income. The private sector is generally unable to obtain these same waivers, and must exclude low-income groups from its development schemes. There is a lack of information concerning how land markets work. Many land transactions and prices are either not recorded or misreported. Neither the private sector developer nor the ultimate plot buyer can evaluate prices and make economically sound choices when information is unavailable. This contributes to land speculation in two ways: sales agents are able to manipulate the actual demand for land in the absence of accurate and current transaction and price information; land transactions with black money can take place without official scrutiny. The concept of master planning must be replaced by dynamic spatial planning. Master planning cannot keep pace with urban growth; planning is, therefore, always lagging behind, which directly contributes to the growth of costly, unplanned and under-serviced informal communities. Under dynamic spatial planning, local government develops a long-range vision for the city, but concentrates its planning resources on short-term issues: coordination of spatial planning with a realistic estimate of the availability of infrastructure; focussing the planning process on the areas of the city which are under the most severe development pressures; planning fo; change. Partnerships in Land Development” (Prepared Lee Baker and David Sims, “India Public/Private for AID, PADCO, Washington, DC, 1991). Alan Carroll, Robert Olsen and John Leatherdale, “Constraints Affecting the Efficiency of Urban Land Markets in India” (Prepared for AID, PADCO, Washington, DC, 1991).
HAB17:2-E
62 17.
18.
19.
20.
21. 22.
23. 24.
Charles J. Billand
The idea for a series of seminars on urban land issues grew out of an Asian regional policy seminar on land sponsored by AID’s Office of Housing and Urban Programs for Asia. After three days of deliberation on land within the Asian regional context, the Indian delegation decided to reconvene the following year to examine land in India. [Charles J. Billand, “Chiang Mai Land Policy Conference: Impact on India Program” (Prepared for AID PADCO, Washington, DC, 1990).] With the Ministry of Urban Development and India’s National Housing Bank acting as co-sponsors, a core group of seminar participants was formed. The group consisted of key public and private sector actors in India’s land development process. To accommodate India’s vast size, regional distinctions, and the fact that land is a state subject, seminars were held in Udaipur, Delhi, Aurangabad, and Bangalore. The core group was joined at each location by key representatives of state and local government, and private sector land developers. The purpose of the seminar series was to clearly define the urban policy reforms required to increase the supply of land with access to infrastructure and municipal services. In a study prepared by Baker and Sims (see note 16). seven currently on-going examples were identified and analysed. in which the public and private sectors had created partnerships to carry out land development activities in India. Broadly, these included integrated township development schemes, land readjustment schemes, guided urban development, and the use of housing cooperatives and non-governmental organisations (NGOs) to deliver land. It should be noted that the guidelines for structuring partnerships between local governments and either housing cooperatives or NGOs will be substantially different than those proposed here for private developers. Since the goals and objectives of cooperatives and NGOs differ greatly from land developers, the incentives for creating a mutually beneficial relationship will differ substantially. What housing co-ops and NGOs are willing to provide to local government, and what they wish in return, are quite different from land developers. The fourth land seminar, held at Bangalore in June 1992, identified a number of policy reforms related to the legal and institutional framework for urban land management in India. A number of those directly related to land acquisition (i) The Land Acquisition Act of 1894 contains provisions which distort the amount to be paid by the public sector to the land owner. These distortions delay acquisition because of lengthy court cases. There is a need for a new Urban Land Acquisition Act which corrects these distortions in setting the price, and provides an alternative for private sector assembly of land for urban development. (ii) In many cases the Urban Land Ceiling Act negatively impacts on the public sector’s ability to acquire land. The participants recommended scrapping the act in favour of a tax on vacant land. The funds generated by this tax will be used to accomplish the social objectives of the Act: equitable access by the poor to land. Administrative delays of up to five years in the review and approval of land use and building sanctions increase the financial risk for private developers and the cost of serviced land. These delays are caused by inefficient and arbitrary administration of land-use controls, and because of a lack of skills at the local government level [Carroll et al., 1991 (see note 16)]. The front-end capital required to hold land and secure planning, engineering and architectural services may not be recovered if the land use and building sanctions are not ultimately approved. The additional cost for financing this front end risk capital can be substantial, and will be passed on to the land purchaser if and when the land development proposal is approved. Baker and Sims. 1991 (see note 16). The coordination among the urban development authorities, the local municipal bodies, the revenue authorities and the infrastructure agencies is in general quite poor in all the cities. As a result, at all stages of the land development process, from the preparation of master plans/development plans for the metropolitan area. smaller area level plans like zonal plans or Town Planning Schemes, or granting of layout permissions and building permissions, there are inordinate delays. Most of these delays are procedural. For example. the master plans and zonal plans must be approved by the state government in every state and it takes from three to seven years for the completion of the entire process. Denish Mehta and Mira Mehta, “Land for Shelter Delivery of Serviced Land in Metropolitan India” (Prepared for AID Centre for Environmental Planning, Ahmedabad, India, 1991). Billand, 1990 (see note 4). Carroll et al.. 1991 (see note 16).