Monetising Land Banks Of Government Agencies Will Make Housing Affordable In India

Valuable urban land is scarce in India, and this is true of most countries across the world. But, even in the most prosperous countries where governments use land more efficiently, large tracts of publicly owned land are underutilised. This is true of India, too, where according to estimates by the World Bank and other organisations, about 30-40 per cent of the urban land is publicly owned. Things are not likely to remain this way as the Indian government is working towards monetising assets of public sector enterprises. The government plans to begin the monetisation process with land owned by loss-making public sector companies.

The problem, however, is much bigger than that. A 46,333 hectares of land of Indian railways is idle, and the rest of the 414,240 acres of land is underutilised. This is true of various port trusts, too, land that belongs to the Ministry of Defense and other organisations.

This is a not a problem which India alone faces. Even in global cities like New York, large tracts of land are idle or underutilised, and it is quite possible to use such land to build houses. According to Mckinsey, a research major, in Saudi Arabia's Riyadh, 40 sq km of zoned residential land that has access to good infrastructure was lying idle for 20 years in 2014. From 1999 to 2014, the value of this land grew from $300 per sq m to $1500 per sq m in the most expensive areas. In Riyadh, nearly 1,141 sq km of land is vacant, and much of this land has access to good infrastructure. Mckinsey also found that 40 per cent of the residential area in Nairobi is vacant, too. It is important to note that housing shortage is severe in Nairobi. There is no good reason why this should happen when 40 per cent of the residential land remains idle. Nearly 66 per cent of the population in Nairobi lives on two per cent of the land. Like in many Indian cities, because of man-made shortage of valuable urban land, people and firms have moved to suburbs. This has raised the average commute, making the labour market fragmented, and the city more polluted.

In Indian cities, land often remains idle because of lack of clear property titles, but this is not true of government land. It is possible that some of the idle government land is set aside by government agencies for infrastructure development in the future. It may be that some land is not easy to put to good use, like land on the sides of various railway tracks, or land that is necessary for servicing and maintenance of railway tracks. Some of this land may be necessary for building complementary infrastructure. But this is not the primary reason why enormously large tracts of public land remain idle.

Regulations that prevent public land from remaining idle, for example, can solve this problem to a degree. Releasing public land is another way to put such land to better use. Urban planning thinkers like Alain Bertaud think that abolishing stamp duty and aligning property tax rates with the best possible use of land will force government agencies to give up their land. The logic is simple. If the idle land that belongs to Indian Railways is too expensive, the property tax would be too high for Indian Railways to bear. So, it is reasonable to expect that the Indian Railways will find a way to get rid of such land, or at least to put it to good use.

Some of the idle land is encroached by slum dwellers. According to the Ministry of Housing And Urban Poverty Alleviation (MoHUPA), 1,198 acres of land that belongs to Indian railways, 2,876 acres of land owned by Ministry of Defense, 5,800 acres owned by Department of Public Enterprises, and 5,000 acres under the Ministry of Steel and Heavy Industries, is occupied by slum dwellers. According to MoHUPA, there is a general reluctance among government agencies to relocate slum dwellers on their own land.  Government agencies are not willing to allow relocation on idle land that does not serve any purpose. MoHUPA thinks that a separate cabinet note would be necessary to compel government agencies to put idle land to good use. In many cases, government agencies can grant legitimate property titles to them, at no cost to them.