Reform in Practice: Anirudh Burman (XKDR Forum) on Deregulating India’s Urban Land Markets

What is one area of regulation in India that should be deregulated?

So, I work in areas like land markets and cities and I focus a lot on what is going on in urban governance, urban development, whether we are using our land markets properly and whether we are actually trying to increase the productivity of land that is available for our cities. And that entire market has been heavily restrained by a maze of regulatory restrictions ranging from how high you can build to how much of your own land you can actually use to build a property or a piece of or a building on. And many laws and regulations like FSI requirements, setback requirements, margin requirements, zoning laws that prevent you from using the property for different kinds of purposes.

They have heavily constrained India's land markets in urban areas and they also prevent land from being used productively. So, there needs to be a lot of deregulation in terms of the kind of restrictions that we have imposed. India had some of the toughest restrictions on the use of land markets in Indian cities and we are slowly seeing this change in some states in India.

So, for example, Maharashtra had a statewide reform of its building by law regulations that gave much more FSI, much more freedom to build and design buildings for owners within their own plots of land, allowed them to build much more of vertical high-rise buildings and also rationalized some zoning requirements. So, some states are beginning to do these things. This is not complete.

A lot more needs to be done. However, the issue that is plaguing Indian cities goes deeper than just this kind of deregulation. We also need to make sure that we are providing public goods that are commensurate with this deregulation because while we want markets to be fully functional and to work freely, we also want to ensure that the negative externalities or the side effects of increased density, increased development can be internalized by the state and actually do not affect the broader public.

So, what I mean by this is, in everyday life, we see that we are seeing much more high-rises coming up in at least in major Indian cities, but we don't have a good response to issues like garbage disposal, to urban flooding, to water, to sanitation issues. These are all negative externalities which take place when more and more people live on a smaller or a same plot of land. So, we need to provide public goods and public goods involves the government or the state being able to actually plan a piece of area or a region of the city so that it can actually decide what the road networks should look like, what the transport network should look like, what options it should provide for people to connect to the arterial roads in the city, what kind of drainage and sewage system the city should have.

So, that public good of planning, I feel has been severely undersupplied in Indian cities and this itself is a problem because over the last 50-60 years, we have had a system of master planning which imposed a lot of the restrictions that we are trying to deregulate in the first place. So, it's not that we did not have planning, but we did a version of planning that was extremely restrictive, that was counterproductive, that did not allow cities to grow and now we seem to have moved in the direction where we are allowing cities to develop without doing adequate planning. So, we need to both deregulate and to provide that public good of proper coherent planning that allows markets to work.