Urban Land Markets and Land Price Changes

A Study in the Third World Context

Amitabh Kundu

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429776267
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First published in 1997, this study is one of the forerunners in the area of urban land market and land price studies on a Third World city, focusing on Lucknow City in Uttar Pradesh, India, and exploring house prices, economic changes and construction. Amitabh responds to the 2nd Habitat Conference of 1996, which realised that housing conditions for lower income group people in most Third World cities have not improved, especially with regards to tenure, affordability and overall housing quality.

1 Introduction

The past thirty or forty years have witnessed a massive increase in the number of people living in towns and cities in developing countries. Within the so-called Third World, Latin America is already predominantly urbanised, and in large parts of Asia and Africa urban populations are growing by more than four or five per cent per annum. Against this background, it is perhaps not surprising that some academics and policy-makers have begun to worry about the negative aspects of this ‘urban explosion’. Hoselitz warned in the late 1950s of a parasitic over-urbanization of some developing countries (where rates of urbanization far exceed rates of industrialization: Hoselitz, 1957), and through the 1960s, 1970s and 1980s attention was focused on the problems of slums and shanty-towns, on growing environmental pollution, and on the workings of urban land markets. Some of these studies were optimistic in tone and content - as, for example, were Mangin’s and Turner’s studies of low-income housing in Latin America (Mangin, 1967; Turner, 1969 and 1976), and De Soto’s (1989) later analysis of the human potential latent in the urban informal sector - but the dominant mood was more often gloomy. The Third World city is often represented not just as a city-with-problems, but as a problem in itself.

This book is determined to keep an eye on the debates that have surrounded some of the issues mentioned above, but its point of focus is quite different. My focus here is not exclusively on the ‘urban poor’ (such as squatters),¹ or on the problems of the mega-cities like Mexico City and Bombay, nor even is my main concern to intervene in the increasingly arid theoretical disputes about urban land markets that have pitted neo-classical economists against Marxists and others besides. My focus is rather on land price changes in one of India’s large metropolitan cities (Lucknow), and on the determinants and effects of such land price changes insofar as I can document them. In the Indian context (especially) such a point of focus is most unusual, not to say unique. This book is based on an extensive and critical examination of four major sources of data on land price changes in selected peripheral colonies of Lucknow, including the data that I derived from a sample survey of 521 households living in high and middle-income group colonies in the periphery of Lucknow. (I deal with this survey in detail in chapter 5). I am also concerned to ‘get inside’ the unitary land market that is so often assumed to exist in many Latin American studies, and to paint a picture, instead, of a land market segmented in terms of types of land delivery agency. In Lucknow, as elsewhere in India, we need to understand the patterning of urban space that is created by public sector urban and housing development agencies, as well as by cooperative societies and private developers. Indeed, I will argue that an analysis of the segmented land markets of Lucknow must begin with an analysis of the land acquisition and preparation activities of the major state urban and housing development agencies.

A detailed outline of the book is offered at the end of this chapter. As far as the rest of the chapter is concerned, my aim is to review the main literatures which bear upon this research, but which do not engage directly with the particular problems of Lucknow or Uttar Pradesh. In more detail, I will be concerned with: (1) research on urban land markets in Third World cities;² (2) the major themes of urban land market research in India; (3) the conditions of entry of the ‘urban poor’ and ‘low income people’ into urban land markets; (4) the desirability of state interventions in urban land markets in the Third World; and (5) a review of land price research in Third World cities. Throughout this discussion I shall register my unease at the use of such concepts as the ‘formal’ and ‘informal’ sectors (to describe urban land markets), and at the common tendency only to focus on the housing needs and strategies of the ‘urban poor’ (howsoever this group is defined).

Urban land markets in Third World cities

During the 1980s and 1990s much of the stimulus to study urban land markets in the Third World was generated by the ‘informai’ and ‘illegal’ sub-divisions that were carried out by the ‘urban poor’ and ‘low income households’ on the peripheries of developing cities (Gilbert, 1981; Gilbert and Ward, 1985; Trivelli, 1986; Ward, 1989; Jones, 1991; Brennan, 1993: 85). This was especially true in Latin American cities, where there was an increasing focus on studies of urban land markets at this time.³

Very little documentation is available on the nature of peripheral subdivisions in Africa,⁴ although a recent survey of some Kenyan cities suggests that ‘Latin-American’ style processes may be occurring there (Macoloo, 1996). In the case of Guinea and Nigeria, most land tenures are publicly-owned (Durand-Lasserve, 1991; Omirin, 1992), while a study of Cairo suggests that land sub-divisions in the peripheral areas of some North African cities are no more ‘informal’, ‘illegal’ or ‘invaded’ than one would expect to find in most Latin American cities. In Cairo nearly 84% of all housing units which were built during 1970-1981 apparently belong to the ‘informal housing sector’, and these houses are fairly similar in design and materials to those belonging to the ‘formal housing sector’. These ‘informal housing units’ generally contravene building bye-laws and codes (Brennan, 1993: 83), and it is largely because of these violations that such housing units are accounted ‘informal’ or ‘illegal’, even where these categories are not very meaningful. It is also unclear whether fully 84% of houses in Cairo are exclusively occupied by ‘low income groups’ only.

In most South Asian countries signs of ‘Latin-American’ style sub-divisions on the periphery of cities are not readily observed. Squatter settlements in many Asian cities usually grow by accretion rather than by the ‘planned land invasions’ that are often found in Latin American cities (UNCHS, 1982). Upon arrival in a large Indian city, in-migrants generally seek shelter from two sources: (i) by renting in slum settlements, in modern and serviced settlements, or in settlements that exist between these two categories; or (ii) by making a temporary hut on vacant land in the vicinity of the city centre, mainly along the railway tracks or on open unused public land which they do not own at the time of habitation, and from which they are liable to be evicted. These two options will be available to in-migrants according to their social and economic status. Once the in-migrant is settled in a city, s/he may either start looking for land to build a house, or seek a built house/plot in the public, private or corporate sectors. The decision to build a house, or to settle down permanently in a city is dependent upon many factors, including the intended length of stay in the city, economic security, social and cultural preferences, and the ability to purchase a permanent house.

A person searching for land or a built-house will have three main options. The first is to apply for a built-housing-unit in the public sector (or occasionally in the private sector). The second is to buy land on the periphery of a city through institutionalised or conventional sub-divisions. The third option is for in-migrants to move out from their first place of residence to live or rent in houses built in the peripheral areas of a city (especially if their former residence was in a slum area). Such movements do not necessarily apply in the case of those who began squatting in central areas of the city, as these squatters may move on to squat on some other centrally located land. It should also be noted that relocation of squatter settlements from the central to the peripheral areas of big cities like Delhi has not been entirely successful. Large-scale squatter colonies can still be found in abundance in Delhi’s most congested and highly commercialised areas.⁵ Squatters still have a tendency to settle in areas close to the city centre, and this is a characteristic of almost all the fast growing metropolitan cities in India.

From my experience of the Indian situation, I would say that a massive amount of land accumulation, and large scale investment in housing and land development projects by State agencies (such as the Delhi Development Authority), has encouraged higher income group households (but not the poorer households) to sub-divide land in the vicinity of the public sector subdivisions. This is practised in the expectation of an ‘adjacent valorisation’ of the household’s sub-division in the future. Such sub-divisions are often referred to as ‘informal’ and ‘illegal’ by the State authorities, although the regulations that determine the legality of such sub-divisions are of questionable merit given the housing problems facing those who happen to sub-divide land on the periphery. It is also important to note that many of the building bye-laws and zoning regulations prescribed in an Indian city’s Master Plan are old and obsolete.⁶ (For more on land delivery mechanisms in India see Roy, 1983; Sarin, 1983; Wadhwa, 1983b; Benjamin, 1985; Benninger, 1986; Misra, 1986; Acharya, 1987; Van der Linden, 1989; Rao and Patkar, 1989; Mitra, 1990; Garg, 1990, Raj, 1990; Sharma, 1991; Misra, 1991; Joshi, 1991; Benjamin, 1991; Gengaje, 1992).

Probably the main stimulus to the study of urban land markets in India has been the increasing role of State agencies in acquiring, developing and subdividing peripheral land in Indian cities. The stimulus does not relate only to what was mentioned before in the Latin American context. In India, it is the State institutions themselves, and their managers, that have started the race to initiate sub-divisions in the peripheral land markets of certain cities. Once the race begins a variety of participants join in, but the ‘urban poor’ and ‘low income groups’ do not readily participate because the entry fees are beyond the financial capabilities of such groups. Contrary to the conventional belief, it is mainly the high and middle income groups that are engaged in sub-divisions on the periphery of many Indian cities.⁷ In chapter 4 I shall explain how the ‘sub-division-race-model’ has worked in Lucknow City.

Urban land market research in India

Since the early 1980s four major research themes on urban land markets in India have been addressed by researchers:

(I) Land policy evaluation and its impact upon the mechanism of the urban land markets

A good deal of urban land market research in India has focused on the evaluation of two main land policies: (i) the acquisition, development and appropriation of land by competent State institution(s);⁸ and (ii) the enactment of urban land ceiling Acts.

The first Central Government land policy was formulated as far back as 1961, and was applied to the development of Delhi. The major features of this land policy were five-fold: (i) to freeze private land developments; (ii) to promote large scale land acquisition by the public sector so that developed land could be made available at the right time, at reasonable prices and in the right quantity; (iii) to allocate land at a predetermined rate to low and middle income groups and cooperative housing societies, but at auction prices to high income groups and for commercial purposes; (iv) to design land tenure on a leasehold basis with a ground rent of 2.5% per year; and (v) to distribute a suitable percentage of developed land among low income groups (Datta, 1992: 195). The Delhi Development Authority (DDA) was entrusted with the responsibility for the implementation of these policy objectives. Nevertheless, the implementation of this land policy in Delhi has not achieved all of the stated objectives of the policy, partly due to the ‘vagueness’ and ‘confusion’ of the policy objectives themselves (Menezes, 1983: 48; Acharya, 1987a: 112). Instead, the DDA has assumed a quasi-monopolistic status in Delhi’s land markets and has often been noted to be working as a private rather a public sector institution in a socialist democratic state (Datta, 1992; Acharya, 1987a; Misra, 1986). In spite of such partly unsuccessful realisations of the land policy objectives set by the DDA, the Delhi model of land policy implementation has been passed on to many Development Authorities in India, including that of the Lucknow Development Authority (LDA). Whether the Delhi model has worked in similar ways in other cities in India, and achieved similar results, is not very clear. This book will examine this question in the context of the Lucknow Development Authority (LDA) and will also focus upon the workings of another State institution which operates in Lucknow: the Uttar Pradesh Housing and Development Board (UPHDB).

The Urban Land (Ceiling & Regulation) Act, 1976 (ULCRA) is the other major urban land policy instrument used by the Indian government.⁹ This legislation aims to promote distributive justice in the urban land market via the socialisation of urban land and by curbing urban land price increases. In spite of these fine objectives, the practical problems of Act implementation have attracted a good deal of criticism (Mullick, 1981; Rao, 1981; Wadhwa, 1983; Chaudhuri, 1984; Gupta, 1985). Acharya (1987: 49) sums up the performance of the ULCRA by stating that it has not only been a ‘failure’ in the sense that its objectives could not be achieved, but also (and much worse) that the results have often been the opposite of what was intended. One such failing refers to the State’s inability or reluctance either to acquire land for poorer households or to make good use of it once the land was acquired. I shall later refer to these two land policies in the context of Lucknow.

(II) Urban fringe land markets and land operators

In an important study of the urban fringe markets of Ahmedabad, Wadhwa (1983a and 1983b) focused on; (i) the behaviour of land operators; and (ii) an examination of land taxation policies and their impact upon the evolution of land use patterns in fringe areas. The results of this work reveal that the conversion of agricultural land to urban use occurs over a substantial period of time. During this period a major role in the development of urban fringe land is played by land speculators, whose activities in the fringe land market are almost entirely based upon ‘future expectations’ of prices and urban growth. It is the initiatives taken by these ‘speculators’ that help to reveal the urban potential of an area and open it up for urban development (Wadhwa, 1983b: 90).¹⁰ Whilst Wadhwa (1983b) does not properly identify these speculators, we may assume that they include private developers, public sector institutions and legally organised groups of people as land speculators.

(III) Land delivery mechanism in urban land markets in India

Another aspect of the urban land market that has been addressed by many Indian researchers relates to land delivery processes (Benninger, 1986; Roy, 1983; Wadhwa, 1983b; Mitra, 1990; Baross, 1983). The literature on the Indian urban land market suggests that most ‘private-sector based illegal subdivisions’ provide housing to a majority of ‘low income people’. This mode of land supply is popular and is often assumed to be open to anyone who can afford to buy land - often in preferred locations and with a minimum of bureaucratic meddling. On the basis of a study of Poona City, Benninger (1986) argues that private sector-based illegal sub-divisions would perform better if the State supported these sub-divisions by liberalising its building regulations, zoning rules, tenure conditions and reducing stamp-duty payments at the time of plot transaction. Roy (1983), on the other hand, identifies three ways by which ‘low income groups’ acquire land for housing purposes in Calcutta’s urban land market, (a) Investments made by ...

Table of contents

• Cover
• Half Title
• Dedication
• Title Page
• Copyright Page
• Table of Contents
• Preface
• 1 Introduction
• 2 Land tenure, economic characteristics and urbanisation in India
• 3 Lucknow City: urban developments and housing demand
• 4 Changing dynamics of the urban land market in Lucknow City
• 5 Data problems, methodological issues and the selection of study colonies
• 6 Land price changes in Lucknow City, 1970 - 1990
• 7 Determinants of land price changes in Lucknow City
• 8 Land prices, construction costs, and the affordability of housing in Lucknow City
• 9 Summary and conclusions
• Bibliography
• Appendicies