How Transit Oriented Development Would Make Homes Affordable

Transportation networks are expensive to build. They are not periodically overhauled, according to changes in the demand for metro lines or highways. A densely settled neighbourhood may not be connected to a metro line while a sparsely populated area may be. One way to deal with this is to build metro lines where the demand for metro lines is the greatest. The demand for metro lines is greatest where population density is the highest. This is the fundamental principle that guides transit oriented development (TOD) .

In July, the Union Urban Development Ministry approved transit-oriented development policy for national capital Delhi, allowing a floor space index (FSI) of four in selected areas near metro transit corridors. While transit-oriented developments are mixed-use residential and commercial areas designed to broaden access to public transport, FSI is the ratio of a building's total floor area to the size of the piece of land upon which it is constructed.

Recently, local authorities in Maharashtra's Nagpur also decided to allow extra FSI within 500 metre of the metro corridor, if the land parcel is bigger than one acre. The model is likely to be replicated across the country.

A look at why transit-oriented development is important and how this will make real estate in India more efficiently priced:

The market price system eliminates shortages with ruthless efficiency. When there is a shortage of potatoes, the price of potatoes will rise. When the price of potatoes rise, farmers produce more potatoes because the profits from producing more rises too. Every market player involved in the process will play his own role to raise the production of potatoes. But, this is not true of roads, highways, metro lines or public infrastructure.

Delhi has one of the largest subway systems in the world and this was built in the past thirteen years. It does happen that public infrastructure responds to the needs of people like farmers and vendors do. But, there is not necessity that it does the same way goods traded every day in the market do. Urban local authorities and state governments are not led by the same incentives market players do. They do not have the valuable information that the market price system sends out, day in and day out. This is especially true while building transportation networks. So, transportation networks should be designed in a way that it meets the needs of people.

Transportation networks should be built in areas where population density is high because people do not typically prefer to walk more than 10 minutes to reach metro transit stations. In 10 minutes, a typical human being walks about 800 meter. So, metro transit stations would be more profitable if population density is high at a distance of 800 meter from metro transit stations. Urban policy experts think that the density should at least be 30 people per hectare for transit systems to be profitable. As Indian cities are very dense, this would not be much of a constraint.

In Indian cities, however, many people have to reach the metro stations in their own personal vehicles or in rickshaws. This is because they do not live close enough to residential developments. By allowing high density development near metro transit corridors, governments can ensure that more people live near metro transit stations. This would reduce the commute to transit stations.

It is true that governments cannot accurately estimate demand. But, governments can look at residential property prices. If residential property prices in an area or real estate prices in general are high, this means that high density development is warranted in that area. This also means that mass transit system are more likely to be successful in that area. This is so, because when density is high, land would be more expensive. Real estate development on expensive land would be profitable only if buildings are tall. By allowing such tall buildings in dense areas, and by connecting them to metro lines, governments can meet two complementary goals that make apartments in India more affordable.