Land value capture

India’s cities are racing to build metros, expressways, and regional rail systems at unprecedented scale. Yet the financial foundation beneath many of these infrastructure projects often remains fragile. Building a metro costs anywhere between %250 and &550 crore per km, but fare revenues rarely cover even operating costs. The outcome is predictable — metro systems operate in chronic deficit.

- VINAYAK CHATTERJEE

Hong Kong’s MTR and Tokyo's private railways achieve surpluses, primarily through real estate and commercial revenues rather than fares, underscoring that public transport systems, by design, cannot pay for themselvessolely through ticket income. Anewmetro station can raise surrounding land prices by 15-30 per cent or more within 12-18 months. Studies from Delhi, Bengaluru and Hyderabad show that land values within 500-800 metres of stations rise sharply, even when ridership is modest.

In India, most of this publicly created wealth is captured privately. This asymmetric equation is not merely inefficient; it is unjust!

“Land value capture” (LVC) is based ona simple principle that when public investments increase — orcreate—land value, a portion of that “unearned increment” must revert to the public. Hong Kong's MTR recovers 20-25 per cent of capital costs through its Rail + Property model. Tokyo's Tsukuba Express financed 63 per cent of its project cost through land readjustment and resale. London's Crossrail project (now known as the Elizabeth Line) raised £4.1 billion via citywide development levies.

India has made attempts. The 2017 Metro Rail Policy, the Value Capture Framework, and the National Transit Oriented Development Policies prescribe LVC. Mumbai charges a 1 percent metro cess on property transactions; Pune and Ahmedabad levy betterment charges; Hyderabad uses transferable development rights; and several states sell premium FSI/FAR (floor space index / floor area ratio).