It's High Time The Indian Railways Used Real Estate Optimally

There is near-unanimous agreement that the Indian railway system is not in form. Major reforms are essential to revive it. Prime Minister Narendra Modi famously remarked that if he had his way, he would have entirely privatized the Railways. Even though the Bibek Debroy committee had recommended greater private participation in the Indian railways, this is unlikely to happen in the near future. Even the Debroy committee steered clear of the word 'privatization' because the concept is controversial for its history in India.

But, there are other ways, besides hiking fares which often proves to be an unpopular move in India, in which the Indian railways can raise revenues. Indian Railways and transit stations consume expensive real estate, but its consumption of real estate is not efficient by any stretch of imagination. Urban policy experts like former World Bank researcher Alain Bertaud have pointed out that transportation is fundamentally a real estate problem. But, the Indian Railways, a state-owned enterprise, is yet to come to grips with this.

According to a report in The Economic Times, merely 6.5% of the revenue in Mumbai is through fare box revenue, and 27% of this is through rents paid by stall-owners. The Hong Kong , for instance, earns 41% of its revenues through more efficient real estate consumption -- for instance, by selling commercial space. There is a vast market waiting to be served because it is not insufficient demand from commuters that is stopping the Indian Railways. 

The demand for shopping centers, restaurants and stores within transit stations is high, but the government is not willing to tap into such sources of revenue. This is true of the transit stations in the Delhi metro too. There are, of course, genuine constraints because the Indian Railways will have to raise its infrastructural capacity to support such development.

There are many other ways in which Indian Railways consume real estate in a sub-optimal manner. For example, the parking spaces in transit stations, at times, consume more real estate than the transit stations themselves. If the government allows high rises near the metro corridors and railway stations, far more people would live near transit stations. This would lower the number of drivers that park their vehicles near transit stations to pick up passengers.

But, things might be changing. The Rail Corporation is set to implement the proposal in favor of transit-oriented development by allowing greater floor space for mixed use development near transit corridors.

Let us hope that the Indian Railways too would facilitate optimal consumption of real estate in a similar fashion.