An Explainer: Transferable Development Rights

Transferable development rights (TDR) is a zoning tool that urban local authorities use to preserve farmland and areas of cultural or historical importance by allowing real estate development in some other area. The right to develop is transferred from the 'sending area' to the 'receiving area'. At times, the right to development is also transferred because the population density is low in the sending area and high in the receiving area.

When implemented well, the transfer of development rights allows urban density to rise while preserving farmlands and cultural and historical spaces. But, this is often not the case. The government of Karnataka, for example, allows transfer of development rights from intensely developed zones to moderately developed zones or sparsely developed zones and not vice versa. But, the demand for floor space is often higher in intensely developed zones which are rich in amenities and civic infrastructure.

In Maharashtra, TDR rates were hiked recently. Earlier, when TDR was available in any part of Mumbai, supply and demand played a greater role in its real estate development. Now, TDR is 60 per cent of the ready reckoner rate instead of 20-30 per cent, and many developers and experts fear that this will undermine the role of markets in allocating floor space.

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