TDR in India: Moving towards urban regeneration

Kishore Gurumukhi
Senior Director & Practice Head - Infrastructure & Government, Cushman & Wakefield India

India is at the cusp of a transformative change. With a predicted GDP growth rate of more than 7.0 per cent over the next five years, it will likely continue to have the fastest economic growth in the world. The growth trajectory is predicted to be driven by an inevitable shift in the already dynamic demographics. The Indian population, which has already reached the 1.4 billion mark and is expected to rise to 1.7 billion, is set to have a significant impact on the country's economic growth. However, especially in the large metro and Class-I cities, the rate of urbanization is not keeping pace with the population growth. To meet the demand for infrastructure and support the rapid economic growth, it is necessary for the state governments and city administrations to commit large resources.

Due to their constrained revenue sources, many city governments find it challenging to plan and carry out significant investments. In addition, the process and cost of land acquisition in urban areas is long, time-consuming, and expensive. A significant spend of project costs are towards land costs. Therefore, adopting novel strategies is now required to finance the expansion of urban services at the desired pace.

This is where mechanisms like transferable development rights (TDR) can play a pivotal role.

Harnessing the potential of TDRs

Proven to be one of the most effective Land Value Capture (LVC) tools globally, TDR has been used by cities around the world like New York, Sao Paulo, Seattle, to name a few. TDR ensures greater intensive land development by encouraging and incentivizing advancement through a higher Floor Space Index (FSI). The implementation of TDR also plays a significant role in the financial growth of the city. It not only supports the compact development of neighbourhoods and zones but also facilitates the creation of open breathable spaces in densely populated cities.

Globally, cities have used TDR as an instrument to raise funds for financing public infrastructure, preservation of agricultural land, developing ecologically sensitive areas and precincts of historic importance and promoting urban renewal to achieve mixed-used development.

How TDR works

TDR is a planning tool that allows government agencies to purchase land from landowners for public use in exchange for credit in the form of FSI for the land sold. This allows for the separation of the property from its development rights and allows the transfer of the development right in the form of FSI to another land parcel within the planning area/region in the form of an FSI.

In India, TDR was first introduced in Mumbai in 1991 to reserve land for public amenities. This was one of the most pressing challenges faced by city authorities at the time. Having seen the benefits of TDR, states and cities are now using it to save resources that would otherwise be spent on land acquisition.  

For instance, rapidly urbanizing cities such as Ahmedabad and Hyderabad have adopted TDR as a compensation mechanism in their development regulation based on the Mumbai model. The purpose of its introduction ranges from conserving heritage, protecting lakes and water bodies, slum improvement, developing public housing, widening roads and improving other infrastructure.

TDR an important tool for development

Over the past 20 years, more than 7.5 million square meters of slum TDR were traded by Mumbai developers to build towers and redevelop housing societies. Gujarat, under the 2010 Gujarat Slum Rehabilitation and Revitalization Policy, 3,467 slums were redeveloped and awarded to developers TDR for the development of units. Also, under the Gujarat Slum Rehabilitation Policy of 2013, a further 4,908 houses were built, and 11,474 houses are under construction through the TDR transfer. Nearly Rs 370 crore worth of TDR has been transacted for the conservation of 2,236 private heritage structures in the walled city of Ahmedabad. Hyderabad has successfully issued 115 DRCs against land purchases for road works and improvements resulting in savings to the tune of Rs 2,500 crore in acquisition costs. The Greater Hyderabad Municipality Corporation also saved Rs 580 crore in acquisition costs by issuing 105 DRCs in the form of Green Reservations TDR.

Robust TDR market requires a well-developed regulatory framework

While TDR is a successful instrument to aid development, it requires a well-designed regulatory framework and enforcement capacity to succeed. There are several cases where the impact of TDR programs is not immediate or there are inconclusive results. However, the government agencies need to assess the impact of TDR regulations and revise regulations in accordance with the performance of the system.  Cities such as Hyderabad, Nashik and Bengaluru have recently amended their TDR regulations to strengthen the existing TDR market. The TDR system for Chennai, first introduced in 2009 and then revised in 2019 and 2020, now aims to implement TDR to assess Chennai's growth corridor and optimize it as an LVC and an urban regeneration tool.

Redefining sustainable growth of cities via TDRs

India's urban growth is primarily concentrated in Class I cities with a population of 100,000 or more. As a result, the number of metropolitan areas (population over 1 million) currently account for 43% of India's urban population and are expected to reach 87% by 2031 according to India Census estimates. By 2030, five Indian states (Tamil Nadu, Gujarat, Maharashtra, Karnataka, and Punjab) are estimated to have an urbanization rate of over 50%.

To introduce TDR as a tool for urban regeneration, it is necessary to innovate the types and mechanisms of TDR implementation. Allocating special TDRs to identify fast growing areas, such as transit oriented development (TOD) corridors and growth nodes, will complement the objective of achieving planned growth in a densely populated city. Developing a robust framework that also includes a 'Green TDR', will drive denser development with higher FSI over time while creating pockets of green, breathing spaces within the growth corridors in and around urban areas. To achieve inclusive and sustainable growth in all dimensions, cities should encourage TDR in conjunction with urban development policies that will catalyze the efforts of the government agencies in steering development away from areas that call for conservation and towards areas that
can accommodate dense and compact development.

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