Hello All, I got into a dinner conversation a couple days ago over development rights. Here's what I understand of it:
1. What happens when a slum is rehabilitated? The slum dweller gets evicted from his slum and is given a house somewhere. This house cost real money. Where did that money come from? My understanding is that the government isn't paying for it. They instead grant the slum dweller a "development right", a right to build in excess of the limits laid down by the city corporation. This is a tradable right, so a builder planning a lucrative sky scraper project will barter this right for cheaper housing elsewhere -- and that is the where the slum dweller gets relocated to. 2. If you buy an apartment and twenty years later, there's a flood or earthquake that leaves the foundation weak. The building is demolished. What asset are you left holding? It's not land, it's a development right to go vertical. 3. Hosur Road in Bangalore is being widened all the way to its starting point from Brigade Road. The Johnson Market area is particularly narrow and raises many tensions for the folks who will lose land (including a popular mosque). One of the key tensions is that the market value of land is far higher than the official value, because market trades are half black, which everyone knows, but which the government cannot recognise. They cannot pay in cash for market value. They have proposed paying with development rights. As rights can be traded for cash, but don't have a consistent, accepted conversion value, the market will bid for them, thus sidestepping the black market for direct trades. The affected parties have been unwilling to accept development rights, however. They argue that the market for development rights is not sufficiently well developed. The right says you can build in excess of the city corporation's building limits (number of floors allowed in a building, for example). This only works if the city corporation is capable of enforcing these limits. This is a form of fiat currency. This explains why the Bangalore Development Authority (BDA) and other corporations in India go on regular demolition drives against "unauthorized" constructions. They cite safety concerns, but as recent fire accidents have shown, they can always be bribed out of it. The real motivation is in establishing the value of the development right. If you think about it, development rights only work when you have multi-story buildings. They have no value with low-rise urban sprawl. They work great in Mumbai, barely in Bangalore. And yet, Bangalore's new found enthusiasm with them points at a corporation that wants to have a role in shaping the city, a role defined with real power. I think this is utterly fascinating because when you look at a skyscraper-dominated city now, it's not just about the wealth and the geographical constraints, but about a system of trade in property that can be de-coupled from the real estate on the ground. To me, this sounds a lot like de-coupling currency from the gold standard. --------- I'm pretty sure this description is sketchy, full of gaps and perhaps incorrect. Help me understand how. Is there a good book on the subject? Best, Kiran -- Kiran Jonnalagadda http://jace.zaiki.in/
