Self-financing urbanization: Insights from the use of Town Planning Schemes in Ahmadabad, India

Through an in-depth review of the financing structures of two projects developed using land readjustment (LR) in the State of Gujarat, India, this article provides insights into LR’s ability to selffinance urbanization. This ability rests on three intertwined factors. First, a rapid increase in the value of developed urban land enables local governments to generate substantial revenue from the sale of reserved land. Second, the local governments retain the reserved land for a significant amount of time before selling it, thereby benefiting significantly from increases in land prices. Third, a revolving fund system, wherein the revenues from older LR projects fund infrastructure in new projects, helps to finance the up-front infrastructure costs and eliminates the need to sell the land early or to seek loans. Furthermore, by using sensitivity analyses, the article shows that the timely accrual of betterment charges would bolster the revenue stream. Finally, the analyses highlight the concern that more land may be reserved than is required to fund the project and argues for more accurate estimates of the need for land reservation.

► I examine the use of land readjustment (LR) to finance urban development in the state of Gujarat, India.
► Local governments retain the land for a significant amount of time before selling it.
► Long withholding period generates substantial revenue from sale of land for local governments.
► More land is being reserved than is required to fund the LR scheme.
► We need more accurate estimates of the amount of land to be reserved for future sale.