Haryana: The New Haven for Startups

Governments and urban local authorities primarily influence real estate development by three means:

• Investment in primary infrastructure such as transportation networks, water supply and sanitation systems
• Taxation, especially property tax, and
• Land use policy and zoning regulations

Indian cities such as Noida and Gurgaon, however, are examples of how the land use policy influences the shape of cities more than tax norms or investment in infrastructure. With Indian business space flooding with startups, it would be interesting to probe which Indian state has the best land use policy for them. Land use policies of Indian states are often a complex set of mutually incompatible norms that cluster together. Indian states with a vibrant startup culture may or may not necessarily have the best land use policy, but business-friendly norms that support such an ecosystem. 

Over the past four decades, though, Haryana has emerged as the state with the most business-friendly land use policy. Here is a look at policy decisions that have helped Haryana emerge as an ideal destination for startups:

• When most countries urbanised, agricultural land was bought by real estate developers, but in India, land use policy makes the process exceptionally difficult. For example, it is difficult to convert agricultural land. A farmer, who wants to sell his land to a developer, will have to find an industrialist with a predetermined proposal to apply for conversion of land for non-agricultural use. But, even if the farmer overcomes this barrier, the real estate developer must obtain change of land use permission. 

Over four decades ago, Haryana removed the non-agricultural use clearance requirement. The Haryana Urban Development Authority Act of 1977 made it easier for the government to acquire land for building townships in Haryana.

• Earlier, the cap on land acquired for townships was at least 100 acres. But recently, the Haryana government decided to lower the minimum land requirement for townships from 100 acres to 25 acres. This will allow startups to flourish in Haryana.

• The chief minister's office also has the veto power in approving request for land conversion and so, developers do not have to approach multiple bodies. This is one of the major reasons why Gurgaon is fast becoming one of the most sought after office space destinations in India.